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Show formulas to fill in for months 0-120 The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an

image text in transcribedShow formulas to fill in for months 0-120

The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an average balance of $100,000 each. The annual interest rate on all loans in the pool is 12% and all loans require monthly payments. Initial Pool Balance Annual Interest Rate Maturity (years) Payments per year Question 1: What price should Blue Algae obtain if the pool is sold immediately to an investor with a required annual return of 10% and no prepayment is expected? Payments from Borrowers Prepaid Principal Service Fee Cash Flow to Investor Month Interest Principal Pool Balance 0 Required Return Price ! 5 10 11 12 13 14 The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an average balance of $100,000 each. The annual interest rate on all loans in the pool is 12% and all loans require monthly payments. Initial Pool Balance Annual Interest Rate Maturity (years) Payments per year Question 1: What price should Blue Algae obtain if the pool is sold immediately to an investor with a required annual return of 10% and no prepayment is expected? Payments from Borrowers Prepaid Principal Service Fee Cash Flow to Investor Month Interest Principal Pool Balance 0 Required Return Price ! 5 10 11 12 13 14

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