Total return for a mortgage-backed and asset-backed security, Financial Management

Assignment Help:

The total return in case of mortgage-backed and asset-backed securities depend on the projected principal repayment and the interest earned on reinvestment of the projected interest payments and projected principal payments. A prepayment rate over the investment horizon is assumed to calculate the total future returns.

In case of mortgage-backed and asset-backed securities that make monthly payments, the monthly total returns are calculated as follows.

Monthly total returns = (Total future returns/full price) 1/no. of months in horizon - 1

The bond-equivalent annual return can be calculated using the following formula.

Bond-equivalent annual return = 2[(1+ Monthly total return) 6 - 1]


Related Discussions:- Total return for a mortgage-backed and asset-backed security

Currency swap, How exchange of principal and interest in one currency? E...

How exchange of principal and interest in one currency? Expalin

Accounting principle, Accounting Principle Accounting principles are t...

Accounting Principle Accounting principles are the primary assumptions, rules of operation, and necessary features that make up the framework for the construction of accountin

Inventory management, A computer products store stocks color graphics monit...

A computer products store stocks color graphics monitors, and the daily demand is normally distributed with a mean of 1.6 monitors and a standard deviation of 0.4 monitor. The lead

Find out the current stock price, Great Pumpkin Farms just paid a dividend ...

Great Pumpkin Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely.  Investors require a 16 p

Obtain the break even rate, Question 1 (a) These are merely the diffe...

Question 1 (a) These are merely the differences of the two prices. Consequently the mark to market losses are given by { Q 1 - Q 0 ,Q 2 - Q 0 ,Q 3 - Q 0

What do you understand by swap, Question 1 Swap is an agreement among t...

Question 1 Swap is an agreement among two or more parties to exchange sets of cash flows over a period in future and What do you understand by swap? Describe its features, kind

Federal reserve system forecast, A. Joe wants to invest in Nebraska Municip...

A. Joe wants to invest in Nebraska Municipal 6% GOB that are rated AA. Joe's tax rate is usually between 28% .  GE plans to sell AA rated 8% coupon bonds. Compute Joe's after-tax i

Assessment of in individual strengths and weaknesses, Assessment of in indi...

Assessment of in individual strengths and weaknesses Before finalizing career plan for an individual and placing him on career path, it is necessary to access his strengths and

Explain the term- operating segments, Operating segments An operating s...

Operating segments An operating segment is a component of an organisation It engages in business activities from that it can earn revenues and incur expenses(this also c

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd