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%.
Do these two problems in Excel. Balance Sheet and Income Statement. The following information is used for the first two problems. Problem 1 is the income statement and problem 2
annual uasage of stock 100,000units carrying cost per unit of stock RM2 order cost RM250 question there is a constraint arising from the floor space of the
Image Storage Corporation has 1,000,000 shares outstanding. It wishes to issue 500,000 new shares using a (North American) rights issue. If the current stock price is $50 and the s
Carr, C., Kolehmainen, K. and Mitchell, F. (2010) ‘Strategic investment decision-making practices: a contextual approach', Management Accounting Research, 21, 167-84. (a) What a
You are required to compute the value of both the firms using Net Income approach.
a) Gross profit = $500,000 and Expenses = $100,000 for Year 2. b) Year 2 GPM = $500k / $1,000k = 50.0% Year 1 GPM = $400k / $850k = 47.05% Year 2 NPM = $400k / $1,000k =
Push Strategy This is referred for marketing approach in which a manufacturer uses its sales force and trade promotions to sell a product actively to retailers and wholesa
Define the balance of payments. Answer: The balance of payments that is abbreviated as BOP can be defined as the statistical record of a country’s international transactions ove
What is Indirect method Indirect method is what you would probably be familiar with. It requires a lot less information to produce it and hence can be argued to be easier metho
When J was promoted to be the new Sales and Marketing Manager for Company L, after working there in different capacities over the last ten years, it was a popular choice between he
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