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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,
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 balance payment payment payment payment payment Ending Payment to investors
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