Question 1 $400 million of MBBs are issued against a $500 million pool of mortgages (overcollateralization is $100 million). There are 40,000 bonds issued, each with a face value of $10,000. The MBB pays 7.5% coupon rate semiannually and matures in 15 years. What is the price of this MBB if the current interest rate is 6.5%? Question 2 Create a schedule of predicted cash flow for the following pass-through. Mortgage pool: $5 million All mortgages are FRM at 10% per year, 5-year maturity, yearly payment Pass-through: $5 million, yearly payment Fee payment: 0.5% of outstanding balance Assume prepayment rate: 0.5% of the mortgage pool for the 1st year, 1% for the 2nd year, and 1.25% for the remaining years What is the value of this pass-through at 8% discount rate? Year Beginning Mortgage Interest Principal Pre- Fee Payment to Ending balance payment payment payment payment payment investors balance