There are two parts in this question, you are expected to answer all of them. Part (a). Complete the following table assuming a prepayment rate of 140 PSA: (3 marks) Original balance: $150,000,000 Pass-through rate: 7% WAM: 360 months interest Cash flow month outstanding balance SMM mortgage payment scheduled principal repayment Pre. payment Total principal repayment 1 $150.000.000 0.023% $1,316,357.36 $875,000 $441,357.36 $34,941.88 $476,299.24 $1,351,299.24 2 $148,648,700.76 0.047% $1,316,357.36 $867.117.42 $449.239.93 $69,337.90 $518,577.83 $1,385,695.25 3 $1,316,357.36 $457,323.16 Note: you don't have to replicated the entire table in your answer. Showing the workings and values of all missing items of Month 3 suffices. Part (b). Suppose you own a mortgage pass-through security as described in Part (a). Describe the influence of a decrease in mortgage rates on the total return of the mortgage backed security as compared to an otherwise identical plain vanilla bond. (2 marks) There are two parts in this question, you are expected to answer all of them. Part (a). Complete the following table assuming a prepayment rate of 140 PSA: (3 marks) Original balance: $150,000,000 Pass-through rate: 7% WAM: 360 months interest Cash flow month outstanding balance SMM mortgage payment scheduled principal repayment Pre. payment Total principal repayment 1 $150.000.000 0.023% $1,316,357.36 $875,000 $441,357.36 $34,941.88 $476,299.24 $1,351,299.24 2 $148,648,700.76 0.047% $1,316,357.36 $867.117.42 $449.239.93 $69,337.90 $518,577.83 $1,385,695.25 3 $1,316,357.36 $457,323.16 Note: you don't have to replicated the entire table in your answer. Showing the workings and values of all missing items of Month 3 suffices. Part (b). Suppose you own a mortgage pass-through security as described in Part (a). Describe the influence of a decrease in mortgage rates on the total return of the mortgage backed security as compared to an otherwise identical plain vanilla bond. (2 marks)