1. (a) Compute the cash flow yield and the bond equivalent yield based on information of a hypothetical mortgage backed security. It is known the price of the MBS is $4,000,000. Month Cash flow to investor 1 $550,000 2 550,000 3 550,000 4 550,000 5 550,000 6 540,000 7 540,000 8 540,000 9 540,000 10 540,000 11 500,000 12 500,000 (b) With above information, will you be able to calculate the average life of the mortgage? Can you calculate the duration? (c) Suppose principal payments account for 50% of the cash flow in each month, what is the average life of the mortgage?