BOA originates 100 Fully Amortizing Fixed Rate Mortgages, each has a $1,000 balance, 4% interest rate (no fees), 25-year term, and annual payments. BOA immediately issues IO and PO strips backed by the pool of these mortgages and sells them to investors who discount payoffs at 3%. Hint: use the Prepay.xlsx file on Blackboard, especially the last years HW7 example.

3. What profits does BOA make immediately? (the answer will be a few thousand dollars)