A mortgage pass-through security (PT) has a par value of $100,000, a 4% coupon paid monthly, and is based on 30 year mortgages. The current
A mortgage pass-through security (PT) has a par value of $100,000, a 4% coupon paid monthly, and is based on 30 year mortgages. The current market rate for similar bonds is 3.5%, and prepayments current equal $100 per month. Assume rates immediately rise to 4.5%, and prepayments drop to $40 as a result. The PT will now be paid off in month 310. What is the price of the PT today?
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Authors: Paula H. Song, Kristin L. Reiter
3rd Edition
1567939759, 978-1567939750
