In each of the following points monthly mortgage coupon rates should be calculated by simply dividing the annual rate by 12. You should also assume that all of the securities pay monthly. You should also divide annual interest rates by 12 to get the corresponding monthly rate and assume monthly compounding when computing present values.

• Consider a $400 million pass-through MBS that has just been created (so the 'seasoning' of the pass-through is equal to 0). The underlying pool of mortgages each has a maturity of 20 years and an annual mortgage coupon rate of 6%. The pass-through rate of the mortgage pool is 5%. Assuming a prepayment multiplier of 100 PSA what is the total amount of interest paid to the pass-through investors? ANSWER IS : 171.18M

• What is the total amount of theprepayments? ANSWER IS 181.09M

QUESTION : What is the total amount of theprepaymentsif the rate of prepayments increases to 200 PSA?