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Consider an MPT that is backed by 100 mortgages with an average balance of $450,000 and with monthly payments. The MPT has a WAC =
Consider an MPT that is backed by 100 mortgages with an average balance of $450,000 and with monthly payments. The MPT has a WAC = 8% and WAM = 60 months. There is no servicing fee on this security. Assuming the prepayment model of CPR=8% (doesn't change each month) and market rate (investor's discount rate) is 7%, how much should this security sell for? (Use Excel for this question and in the last month of cash flows set CPR=0% to ensure you end up with 0 as ending pool balance)
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