1.Consider a mortgage pool with principal of $20 million. The maturity is 30 years with a monthly mortgage payment of 10 per cent per annum.

(Assume no prepayments.)

What is the monthly mortgage payment (100 per cent amortising) on the pool of mortgages?

If the mortgage-backed security insurance fee is 60 basis points and the servicing fee is 40 basis points, what is the yield on the pass-through security?

What is the monthly payment on the pass-through security in part (b)?

Calculate the first monthly servicing fee paid to the originating banks. LO 8.6