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I want to know the whole process of calculation. A pool of mortgages currently valued at $1 million is structured as a combination of a

image text in transcribedI want to know the whole process of calculation.

A pool of mortgages currently valued at $1 million is structured as a combination of a principal only strip (PO) X and an interest only strip (10). The interest rate is 9%, mortgage payments are fixed and paid ANNUALLY, and the remaining term to maturity is 10 years. What is the cash flow to the PO strip in year 3? Assume no servicing fee and no prepayments. Selected Answer: D. 77.619 Correct Answer: A. 78,201

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