Assume an FI originates a pool of short-term real estate loans worth $20 million with maturities of
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Assume an FI originates a pool of short-term real estate loans worth $20 million with maturities of five years and paying interest rates of 9 percent (paid annually). (LG 25-4)
a. What is the average payment received by the FI (both principal and interest) if no prepayment is expected over the life of the loans?
b. If the loans are converted into real estate certificates and the FI charges a 50 basis points servicing fee (including insurance), what are the payments expected by the holders of the securities, if no prepayment is expected?
AppendixLO1
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ISE Financial Markets And Institutions
ISBN: 9781265561437
8th International Edition
Authors: Anthony Saunders, Marcia Cornett, Otgo Erhemjamts
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