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Exercise 2: Consider a loan pool, where the size of the pool is 100 AUD. The pool does not have a prepayment option. The maturity
Exercise 2: Consider a loan pool, where the size of the pool is 100 AUD. The pool does not have a prepayment option. The maturity is 4 years and the mortgage coupon rate is 10%. Payments occur yearly. a) Calculate the constant yearly payment (CYT) to pay off the mortgage over its life. b) At each point in time decompose the yearly payment into the interest component and the repayment component. Determine the outstanding balance at each point in time
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