An asset-backed security has the following expected monthly payments. The price of the security is $12,381,256.

MonthPayments:

1) $1,178,4057

2) $1,112,5692

3) $1,107,3908

4) $1,022,5643

5) $1,096,4439

6) $988,5114

7) $1,254,90010

8) $967,0345

9) $1,095,67811

10) $1,006,2926

11) $1,043,21112

12) $898,451

(a) Calculate the cash flow yield, expressed as an annualized rate based on monthly compounding.

(b) Convert the yield in (a) to a bond equivalent yield (i.e., an annualized rate based on semi-annual compounding).

(c) What assumptions typically are required to estimate the cash flows in an amortizing security?