Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that a pool of mortgages with aggregate par value of $500 million is used as collateral for an asset backed security. The weighted average

Assume that a pool of mortgages with aggregate par value of $500 million is used as collateral for an asset backed security. The weighted average coupon on the mortgages is 8.1% and the pass-through coupon rate is 7.2%.

  1. Assume instead of the tranches above, the pool is organized as a planned amortization class (PAC) tranches and support tranche as follows.

Tranche

Par, $ million

Payment Rule

P-A

150

Monthly coupon payment is distributed in proportion to beginning principal balance. All scheduled principal payments are made first to the PAC tranches in proportion to their par. Support tranche gets distribution from scheduled principal payment only after the PAC tranches are paid off. Any principal payment in excess of schedule is paid to Support tranche until it is completely paid off. Then excess will be paid to the PAC tranches.

P-B

100

P-C

100

Support

150

  1. Prepare payment schedule assuming payment of the coupon determined in (a), and scheduled principal payment of $20 million and excess principal prepayment of $15 million.
  2. Prepare payment schedule assuming that after the first month payment in (i) the borrowers default and repossession of the underlying properties resulted in realization of a net $250 million.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Project Financing Asset-Based Financial Engineering

Authors: John D Finnerty

3rd Edition

1118421841, 9781118421840

More Books

Students also viewed these Finance questions

Question

What is meant by decision-making?

Answered: 1 week ago

Question

Solve the following 1,4 3 2TT 5x- 1+ (15 x) dx 5X

Answered: 1 week ago

Question

Describe contextual influences on direct financial compensation.

Answered: 1 week ago

Question

Describe legally required benefits.

Answered: 1 week ago

Question

Discuss career development and career development methods.

Answered: 1 week ago