Question
Principal-Only MBS and Interest-Only MBS) Suppose we construct principal-only (PO) and interest-only (IO) mortgage-backed securities (MBS) using the mortgage pass-through of the previous questions. Assume
Principal-Only MBS and Interest-Only MBS) Suppose we construct principal-only (PO) and interest-only (IO) mortgage-backed securities (MBS) using the mortgage pass-through of the previous questions. Assume a prepayment multiplier of 100 PSA. What is the present value of the PO MBS if we use an annual risk-free rate of 4.5% to value the cash-flows? Outstanding balance of mortgage 400 millions term of loan 20 years.
P.S Please don't copy paste answers present in this website because nobady has replied to this question correctly, I have already checked
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Ship Finance Credit Expansion And The Boom Bust Cycle
Authors: Peter Stokes
2nd Edition
1859781055, 9781859781050
