Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
A cash-flow yield is the discount rate that makes the price of a mortgage-backed or asset-backed security equal to the present value of its cash flows. It is equivalent to the yield to maturity measure. In mortgage-backed and asset-backed securities, because of prepayments, the cash flow is unknown; so some assumption about the prepayment rate must be made to calculate the cash-flow yield.
Different from a normal bond, which typically pays a coupon semi-annually, a mortgage-backed or asset-backed security makes monthly payments. Therefore, the investor has the opportunity to generate greater reinvestment income by reinvesting the monthly cash flows. In a treasury coupon security, bond-equivalent yield can be found out by doubling the semi-annual yield, but because of more frequent payments the same concept cannot be used in calculating the bond-equivalent yield for mortgage-backed and asset-backed securities. The market convention is to calculate a yield so as to make it comparable to the yield to maturity on a bond-equivalent basis. The formula for annualizing the monthly cash flow yield for a monthly pay product is as follows:
Bond-equivalent yield = 2 [(1 + iM)6 - 1]
Where, iM is the monthly interest rate that will equate the present value of the projected monthly cash flow equal to the market price (plus accrued interest) of the security.
Example: If the monthly cash flow yield is 0.8%, then the bond equivalent yield is
2 x [(1.008)6 - 1] = 0.0979 = 9.79%.
Q. Cost of Redeemable Preference Share Capital? Cost of Redeemable Preference Share Capital: - Redeemable preference capital has to be returned to the preference shareholders s
Clemson Software is considering a latest project whose data are given below. The needed equipment has a 3-year tax life, after which it will be worthless,and it will be depreciate
State about the Financing MBO There are many sources of finances available for an MBO Venture capitalists Merchant banks Institutional investors such as pension funds
Absolute Performance Standard is a method of measuring an organization's development and how effective and efficient it is at operating its business. The absolute performance stand
Project Evaluation The expected value calculations are crucial to project investment decisions. The following example explains the use of probabilities in project evaluation.
What do you understand by financial viability of the organization? 2 : Define Following accounting and financial terms: Asset Liability Equity Income Expense
Margining System: Indian capital markets have finally acquired an international flavor with the market-wide rolling settlement coming into place on both the premier exchanges (
what are the characteristics of relative cost
What is the time value of money? The meaning of time value of money is that money you hold in your hand today is worth much more than money you suppose to receive in the future
The basic form of a mortgage backed security is that of a mortgage pass-through security. Among the mortgage-related securities, the mortgage pass-through s
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd