Explain all answers by hand, no excel

1) Given the following Mortgage loans

30 years , 5.7%, $150,000, next payment #36

25 years, 6.3%, $250,000, next payment #13

30 years, 5.5%, $233,000, next payment #23

Explain the process to create a Mortgage Backed Security with these 3 mortgages and calculate the interest received in the first 5 payments.

2)Calculate the expected change in the equity in a company with assets and liabilities that are rate sensitive. If assets are 120 millions, and liabilities are 90 millions and the interest rates moves from 8% to 9.2%

3) Plot the profit for a long position in call options, having 3 calls with an strike price of $1200, to be exercise in 6 months, if the premium paid today is $48 and the interest rate is 6% (6 months).

4) Explain "clearly" how hedging foreign exchange risk works. Support your explanation with an example.

5) A bank has assets for $150 millions and liabilities for $135 millions. The duration of the assets is 6 years and the duration of the liabilities is 4 years, the current interest rate is 10%. This company wants to hedge the balance sheet with eurodollar futures contracts (contracts of $1,000,000), which currently have a price of $96 per $100 face value for the benchmark three-month Eurodollar CD underlying the contract. The current rate on three-month Eurodollar CDs is 4% and the duration of these contracts is 0.25 yrs.

A) Determine if the bank should sell or buy the contracts. Explain in detail why.

B) Assuming no basis risk, how many contracts are necessary to fully hedge the bank? Explain in detail your results.

6) For a given six months call option, the payoff is $52.35 when the Spot price is $1,350.25 and the yield for the investor that had the long position was 3.27% using continuous rate. Calculate the profit if the spot price is $1,437.47 (4 decimals).

Explain all answers by hand, no excel