The Monte Carlo model in the following table uses two interest rate paths. The second

and third columns in the table report monthly spot rates and the last two columns are

monthly cash flows on an MBS$.$ Also, the present value of the cash flow in Month $2$ on

Path $2$ is $$1,404\mathrm{.}0369.$ Compute the theoretical value of the MBS$.$

Month $($t$)$ Interest rate path $($n$)$ Dollar values $($n$)$

$1212$

$10\mathrm{.}00620\mathrm{.}0071$ $$2,050$ $$1,690$

$20\mathrm{.}00630\mathrm{.}0073$ $$1,960$ $$1,540$

$30\mathrm{.}00640\mathrm{.}0069$ $$1,870$ $$1,770$