The following table provides the latest market prices of three MBS, UMBS 2.5, UMBS 3.0 and...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The following table provides the latest market prices of three MBS, UMBS 2.5, UMBS 3.0 and UMBS 3.5. The number in the MBS name indicates the net coupon rate. For example, UMBS 2.5 is a uniform mortgage backed security with 2.5% coupon rate. Prices are given in proportion to the original pool balance of 100. UMBS WAC UMBS 2.5 UMBS 3.0 UMBS 3.5 Source: Mortgage News Daily. Hint: Price 98.20 100.55 102.83 (A) Compute OAS for each security. (B) How do your results in part (A) show the relationship between OAS and coupon rates? How can you explain the relationship? The value of an MBS is the average of present values of cash flows from the pool. A present value of cash flows is calculated along a path of one-month (risk free) interest rates and five-year (risk free) interest rates. Those interest rates are given in a separate spreadsheet. The following table provides the latest market prices of three MBS, UMBS 2.5, UMBS 3.0 and UMBS 3.5. The number in the MBS name indicates the net coupon rate. For example, UMBS 2.5 is a uniform mortgage backed security with 2.5% coupon rate. Prices are given in proportion to the original pool balance of 100. UMBS WAC UMBS 2.5 UMBS 3.0 UMBS 3.5 Source: Mortgage News Daily. Hint: Price 98.20 100.55 102.83 (A) Compute OAS for each security. (B) How do your results in part (A) show the relationship between OAS and coupon rates? How can you explain the relationship? The value of an MBS is the average of present values of cash flows from the pool. A present value of cash flows is calculated along a path of one-month (risk free) interest rates and five-year (risk free) interest rates. Those interest rates are given in a separate spreadsheet.
Expert Answer:
Answer rating: 100% (QA)
A Answer A OAS stands for Option Adjusted Spread It is a measure of the MBSs yield spread to the und... View the full answer
Related Book For
Operations Management Managing Global Supply Chains
ISBN: 978-1506302935
1st edition
Authors: Ray R. Venkataraman, Jeffrey K. Pinto
Posted Date:
Students also viewed these finance questions
-
The following table provides data on nominal gross domestic product and the money supply (M1 definition) in recent selected years. Compute velocity in each year. Can you see any trend? How does it...
-
The following table provides data on nominal gross domestic product and the money supply (Ml definition) in recent selected years. Compute velocity for each year. Do you see any trend? How does it...
-
The following table provides results of DNA samples taken over the past 15 days using a sample size of 100: 1. Using this information, construct a 3-sigma p-control chart. 2. The following defects...
-
The formula for the power output P of a battery is P = VI - RI where V is the electromotive force in volts, R is the resistance in ohms, and I is the current in amperes. Find the current that...
-
Show that the system of moment a for a rigid slab in plane motion reduces to a single vector, and express the distance from the mass center G to the line of action of this vector in terms of the...
-
Describe the relationship between substrate concentration and the initial reaction rate of an enzyme-catalyzed reaction. Is this a linear relationship? What happens to the initial reaction rate as...
-
Why do companies go bankrupt?
-
Relevant and sunk costs McKinnon Company's plant manager is considering buying a new grinding machine to replace an old grinding machine or overhauling the old one to ensure compliance with the...
-
Consider the equation, f(x)=- (x-2)+5. Identify the parent function and describe ALL the transformations (shifts, stretches, etc).
-
1. Make a prompt and ask ChatGPT 3.5 to describe FIVE latest technologies, IT trends, or innovations in detail. Include prompts used for discovery. 2. Select TWO topics that interest you the most...
-
The correct journal entry for the collection of a note receivable includes a ______. Assume the collection of interest is recorded separately. (Select all that apply.) Multiple select question....
-
What insights does ethnomethodology provide into everyday social interactions, and how does it challenge conventional sociological approaches ?
-
List describe, and give an example of each of the four e-procurement methods and argue when each might be used.
-
es Tasty Subs acquired a food-service truck on October 1, 2024, for $15,900. The company estimates a residual value of $2,100 and a six- year service life. Required: Calculate depreciation expense...
-
Create a class that describes a circle and have the following: 1. Variable Length 2. Variable Wigth 3. Members: a. SetRadius b. GetRadius c. SetCenterX (you set the circle center coordinate xo). d....
-
Lengthy Issue Resolution Delays and Inadequate Notices Burden Taxpayers Who Are Victims of Identity Theft or Whose Returns the IRS Has Flagged for Possible Identity Theft? WHY THIS IS A SERIOUS...
-
Consider a five-year quarterly fixed-notional equity swap in which you pay Libor and receive the equity index return on USD 10 million notional. The current period is of 91 days, and the swap has run...
-
Which of the following streaming TV devices does not involve use of a remote controller? A) Google Chromecast B) Apple TV C) Amazon Fire TV D) Roku
-
An electronics company is planning to outsource the production of the semiconductor chips needed for its products. The company has decided to adopt a multi-sourcing strategy to ensure it has...
-
How is the service level related to safety stock?
-
Norman Stark, Inventory analyst at fictional Grimault Industries, is considering the use of the ABC method of classifying inventory so that he can exercise better control over the critical items in...
-
Why can we say that the mean or the median figure is the choice of an indecisive person?
-
Has a reduction in working capital of 1% the same impact on a DCF as a 1% improvement in the EBIT margin?
-
Which method should be used for estimating the value of a company in decline?
Study smarter with the SolutionInn App