The Green S & L originated a pool of mortgage containing 100 ten year fixed interest rate mortgage with an average balance of $100,000 each (assuming annual payments). All mortgages in this pool carry a mortgage rate of 8% (Assume annual payments), Green would now like to sell the pool to FNMA

(a) Assuming a constant annual prepayment rate of 10%, what is the price Green could obtain if the market interest rates were 9%, 8%, 7%, assuming the servicing fee is 0.5%?

(b) FNMA decide to securitize the mortgage by issuing 100 pass-through securities.The servicing and guarantee fee is .5%. The current market rate of return is 6%. How much will FNMA obtain for this offering of MPTs? ( still assuming 10% prepayment rate)