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Use the following information to answer the questions below: TBA Characteristics: Coupon 2 WAC 2.857 WAM 355 Front Month Back Month Settle Date 12/13/21 1/13/22
Use the following information to answer the questions below: TBA Characteristics: Coupon 2 WAC 2.857 WAM 355 Front Month Back Month Settle Date 12/13/21 1/13/22 Pool Balance 1,000,000 996,165.50 Price $100-16 FV of Payments 5,501.07 Roll Days 31 Reinvestment Rate 0.05% Forward Drop 0-07 Compute the total return when rolling the pool 1. What is the accrued interest on 12/13/21 (1) 2. What is the amount invested on 12/13/21? 3. What is the interest earned if invested at the reinvestment rate for 31 days? (use actual/360 convention) 4. What is the total cash value of the roll position on 1/13/22 before buying back the pool? (1) 5. What is the accrued interest on 1/13/22? (1) 6. What is the forward price on 1/13/22? (1) 7. How much does it cost to buy back the remaining pool balance on 1/13/22? (1) 8. Suppose you immediately sell the pool on 1/13/22 for $101, how much do you receive? (1) 9. What is total return in dollars? (1) 10. What is the annualized total return in percentage? (Use 360/act for calculation) Compute the total return when continuing to hold the pool 1. What is the total return when you continue to hold, then sell on 1/13/22 for $101? (1) 2. What is the annualized total return in percentage? (Use 360/act for calculation) (1) 3. What is the total return advantage for rolling? (1)
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