Question
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% (same CPR for every month, not changing like in PSA model) and market rate (investor discount rate) is 7%, how much should this security sell for?
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Fixed Income Securities Valuation Risk and Risk Management
Authors: Pietro Veronesi
1st edition
0470109106, 978-0470109106
