1. (Principal-Only MBS and Interest-Only MBS) Suppose we construct principal-only (PO) and interest-only (IO) mortgage-backed securities (MBS) using the mortgage pass-through of the above information. Assume a prepayment multiplier of 100 PSA. What is the present value of the PO MBS if we use an annual risk-free of 4.5% to value the cash-flows.

2.(Principal-Only MBS and Interest-Only MBS) Referring to the previous question, what is the value of the IO MBS?

Prncipal a he en d Paus hrous h nt 51. p aid 67. 2 5 (2)- (3 00 0o 376.00 353-44 20.0O 22.56 21-21 9-93 1g 17.67 16.6 IS-6I 14.69 13.30 2-97 3 53.4 332.23 31 2.3O 293.56 275.95 2 59.39 2 43.33 229. 2 d 215-45 2 02.5 90-3 332.23 5 2a 312-30 293-56 2 75-95 2 59.39 243. 83 229-2 O 25- 4 5 202.5 2 190-3 12-3.95 6 8-2 15'3.12 ,43 63 139.71 13)-33 23.4S 6.56 15-56 4-63 3 75 12.9 3 2.1S 1.42 IO 10-77 o-13 9 52 .95 12 13 10.09 9.49 3.72 8-33 7-93 7-41 68-2 58.12 143.63 139.71 31.33 123 45 16 04 7.43 6.99 18 19 20 total 3nt to Passthxou9hJnves dors= 236.63 Prncipal a he en d Paus hrous h nt 51. p aid 67. 2 5 (2)- (3 00 0o 376.00 353-44 20.0O 22.56 21-21 9-93 1g 17.67 16.6 IS-6I 14.69 13.30 2-97 3 53.4 332.23 31 2.3O 293.56 275.95 2 59.39 2 43.33 229. 2 d 215-45 2 02.5 90-3 332.23 5 2a 312-30 293-56 2 75-95 2 59.39 243. 83 229-2 O 25- 4 5 202.5 2 190-3 12-3.95 6 8-2 15'3.12 ,43 63 139.71 13)-33 23.4S 6.56 15-56 4-63 3 75 12.9 3 2.1S 1.42 IO 10-77 o-13 9 52 .95 12 13 10.09 9.49 3.72 8-33 7-93 7-41 68-2 58.12 143.63 139.71 31.33 123 45 16 04 7.43 6.99 18 19 20 total 3nt to Passthxou9hJnves dors= 236.63