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Example: consider the level payment mortgage with initial balance of $100,000, and coupon 9.5%. The monthly payment is 840.85 - We can use the 100%
Example: consider the level payment mortgage with initial balance of $100,000, and coupon 9.5%. The monthly payment is 840.85 - We can use the 100% PSA prepayment model to calculate expected cash flows for the first three months: E(CF)=840.85+0.0001668299,950.81=857.52 - E(CF)=0.9998331[840.85+0.0003339499,901.24]=874.07 - E(CF)=0.99983310.999666[840.85+0.0005013899,851.27]=890.47 Step by Step Solution
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
4th International Edition
013284298X, 9780132842983
