Suppose a $10,000 of 10% fixed rate mortgages have been pooled as security for an issue of 10 pass-through securities. The mortgages have 3 years to maturity. The pass-through will carry a pass- through rate of 9% and a servicing fee of 1%.

Consider the following prepayment assumptions for the pass-through:

The following information pertains to next FOUR questions Suppose a $10,000 of 10% fixed rate mortgages have been pooled as security for an issue of 10 pass-through securities. The mortgages have 3 years to maturity. The pass-through will carry a pass- through rate of 9% and a servicing fee of 1% Consider the following prepayment assumptions for the pass-through: Pass-through A Pass-through B No prepayment throughout the entire term of the mortagages. 50% of the outstanding pool balance is expected to be id at the end of year 2. 10. If the market interest rate for the pass-through is 5%, the market value of each pass-through A is nearest: a) $1056 b) $1066 c) $1076 d) $1086 e) $1096 Sample 4, Tse 11. If the market interest rate for the pass-through remains at 58 the market value of pass-through B is nearest: a) $1064 b) $1074 c) $1084 d) $1094 e) $1104 12. If the market interest rate increases to 15%, then the difference in price between B and A is nearest: a) 11.77 b) 12.77 c) 13.77 d) 14.77 e) 15.77