1) Calculate the TSY STRIP Forecast Interest Rate (Yield) and the Index Forecast Rate for each year.

You work for an nationally charter bank and have been asked to project adjustable rate mortgage (ARM) interest rates for their 15 year loans. Having taken FINC 429, you remember that Treasury (TSY) STRIPS are the best way to forecast mortgage rates. They give you the following loan specifications: 15 year loan Forecasted Interest Rate = Calculated TSY STRIP Yield Index Forecast = Forecasted Interest Rate + 2% Index + Margin = Index Forecast + 2.5% Teaser Rate = 3% Contract Rate = Actual Interest Rate Used That Year Periodic Cap = 2% Life Cap = 5% You pull the following TSY STRIP prices from the Wall Street Journal website: You pull the following TSY STRIP prices from the Wall Street Journal website: Loan Year No Year 2014 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Stripped T-Bond Price Dollars 100.000 99.873 99.348 97.231 97.219 94.749 92.539 89.225 85.699 80.71 78.876 72.418 69.139 66.05 61.654 60.193 10 11 12 13 14 You work for an nationally charter bank and have been asked to project adjustable rate mortgage (ARM) interest rates for their 15 year loans. Having taken FINC 429, you remember that Treasury (TSY) STRIPS are the best way to forecast mortgage rates. They give you the following loan specifications: 15 year loan Forecasted Interest Rate = Calculated TSY STRIP Yield Index Forecast = Forecasted Interest Rate + 2% Index + Margin = Index Forecast + 2.5% Teaser Rate = 3% Contract Rate = Actual Interest Rate Used That Year Periodic Cap = 2% Life Cap = 5% You pull the following TSY STRIP prices from the Wall Street Journal website: You pull the following TSY STRIP prices from the Wall Street Journal website: Loan Year No Year 2014 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Stripped T-Bond Price Dollars 100.000 99.873 99.348 97.231 97.219 94.749 92.539 89.225 85.699 80.71 78.876 72.418 69.139 66.05 61.654 60.193 10 11 12 13 14