1) The Green S&L originated a pool containing 75 ten-year fixed interest rate fully amortizing mortgages with an average balance of $200,000 each. All mortgages in the pool carry a coupon of 10%. (For simplicity, assume all mortgage payments are made annually at 10%). The prepayment rate will be 3% annually in years 1 through 3 and 6% thereafter (assume that prepayments are based on the pool balance at the end of the preceding year and begin at the end of year

a). Green would now like to sell the pool to FNMA. What is the price that Green could obtain if market interest rates were 11%?

b) Assume that four years have passed since Question 1. What will the pool factor be (*not*in percent)?

c) Assume that six years have passed since Question 1. If market interest rates are 10%,

what price can Green obtain now?

d) Instead of selling the pool of mortgages, Green decides to securitize the mortgages by issuing 100 pass-through securities. The pass-through coupon rate will be 9.5% and the servicing and guarantee fee will be 0.5%. However, the current market rate of return is 11%.What will Green receive for this offering, i.e., what is the value of all the pass-throughs he issues?

e) What is the WAL (in years) of the pass-throughs in question 4?