What will the mpt security be worth now

Assignment Help Finance Basics

Reference no: EM133325746

The Green Mortgage Company has originated a pool containing 75 ten-year fixed interest rate mortgages with an average balance of $100,200 each. All mortgages in the pool carry a coupon of 12 percent. (For simplicity, assume that all mortgage payments are made annually at 12% interest.) Green would now like to sell the pool to FNMA.

Required:
Question 1: Assuming a constant annual prepayment rate of 10 percent (for simplicity, assume that prepayments are based on the pool balance
at the end of each year), what will be the price that Green should obtain on the date of issuance If market interest rates were (1) 11 percent? (2) 12 percent? (3) 9 percent?

Question 2: Assume that five years have passed since the date in (a). What will the pool factor be? If market interest rates are 12 percent, what price can Green obtain then? Price of pool after 5 years?

Question 3: Instead of selling the pool of mortgages in (a). Green decides to securitize the mortgages by issuing 100 pass-through securities. The coupon rate will be 11.5 percent and the servicing and guarantee fee will be 0.5 percent. However, the current market rate of return is now 9.5 percent. How much will Green obtain for this offering of MPTS? What will each purchaser pay for an MPT security. assuming the same prepayment rate as in (a)? Price to Green? Value of MPT?

Question 4: Assume now that immediately after purchase in (c), interest rates fall to 8 percent and that the prepayment rates are expected to accelerate to 20 percent per year, beginning at the end of the first year. What will the MPT security be worth now? Price to Green? Price to MPT?

Reference no: EM133325746

Questions Cloud

What is the current value of one share of this stock : What is the current value of one share of this stock if you estimate that the risk-free rate is 5%, beta is 2 and the market risk premium is 10%

Write a subroutine that prints a string to the console : Write a subroutine that prints a string to the console, by polling, without using sycs a 11. Use the simple linkage convention, with the address of the string

Explain the role of financial intermediaries : Explain the role of financial intermediaries and describe the functions they perform in relation to financial markets. Your answer should refer to at least

How our study of los tres grandes intersect : Describe how our study of Los Tres Grandes intersect, connect, and share Mesoamerican cultural references and Mexican historical events. Cite examples.

What will the mpt security be worth now : What will the MPT security be worth now? Price to Green and What will the pool factor be? If market interest rates are 12 percent, what price can Green obtain

Examples of communication barriers : What are some examples of communication barriers that can exist when interacting with youth and colleagues from diverse backgrounds.

Estimate the construction draw schedule : BUSI 422 Liberty University Estimate the construction draw schedule, interest carry, and total loan amount for improvements a2. Determine total project cost

Do you think social workers have an ethical responsibility : Do you think social workers have an ethical responsibility to ensure clients receive EBP models to ensure interventions have evidence to support effectiveness.

Discusss finances with hiring : SM 630 Western Carolina University Discusss finances with hiring/firing. Is it sustainable for schools to keep paying off coaches (assume the boosters

User Account

All Pages