practise questions 4.1-4.4

4.1

Compute the monthly payment on a 30-year level payment mortgage assuming an annual mortgage rate of 5% and an initial mortgage principal of $400,000.

4.2

(Mortgage Pass-Throughs) 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?

4.3

(Mortgage-Pass Throughs) Referring to the same mortgage pass-through of the previous question, what is the total amount of the prepayments?

4.4

(Mortgage-Pass Throughs) Referring to the same mortgage pass-through of the previous question, what is the total amount of the prepayments if the rate of prepayments increases to 200 PSA?