Please answer all parts of question 2 clearly and show steps of calculation if needed. Appreciate it.

Question 2 (III marks] The Super Fund owns the following two 30-year original maturity mortgage-backed securities shown in the table below. The fund uses the [0year US Treasury yield as a relative measure to gauge the level of current 30-year home mortgage rates Over the past four years, the 10-year US Treasury yield has declined below 5.50% three times, subsequently rising above 6.51] "/6 each time. The 10-year US treasury yield is currently at 6.50%. Weighted Average Current Month Issue Coumn Maturity {months}. Price MES-1 7.50% 355 100 5 MES-2 150% 260 100 IE (a) Analyse the effect on prepayments of each of the following three factors: (i) coupon rate of the mortgage (ii) age of the mortgage (iii) seasonality {b} {0] (9 marks} Describe how principal prepayment risks is measured. Based on the table above which security will experience a higher percentage of principal prepayment? (5 marks} Appraise the reasons why prepayments are likely to be more stable for automobile receivables asset-backed securities when compared to similar-duration mortgage- backed securities. (6 marks}