Question
AQF Bank Limited has a mortgage pool with principal of $25 million. The maturity is 25 years with a monthly mortgage payment of 8 percent
AQF Bank Limited has a mortgage pool with principal of $25 million. The maturity is 25 years with a monthly mortgage payment of 8 percent per annum. The following sets of information are available regarding this mortgage pool: No prepayments. The mortgage-backed security insurance fee is 50 basis points and the servicing fee is 30 basis points. Assume that AQF Bank Limited wants to know after one year value of the mortgage pool and the passthrough security. If interest rates increase 200 basis points after one year, calculate: (i) The value of the mortgage pool after one year (ii) The value of the pass-through security after one year
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