What is the price for each share of mpt security

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Reference no: EM131343424

ABC Bank originated a pool of containing 500 three-year fixed-rate mortgages with loan amount of $150,000 each. All mortgages in the pool carry a rate of 7% with annual payments. The guarantee and servicing fee is 1%. ABC Bank would like to sell the pool to investors via Mortgage Pass Through (MPT) security, 200,000 shares will be issued.

a. If market interest rate is 6%, what is the price for each share of MPT security? Assuming there is no prepayment and default. How much are the cash flows to the investor each year?

b. Assuming that there is 5% prepayment and no default, If market interest rate is 6%, what is the price for each share of MPT security? How much are the cash flows to the investor each year?

Reference no: EM131343424

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