You work for a pension fund that wants to diversify its portfolio by investing in mortgagebacked securities. The fund has identified a potential deal, but it needs your help to model the cash flows, especially because the underwriters have chosen not to follow the typical PSA approach. The prospectus states that the deal coupon is 6.5%, the WAM is 360 months, and the loan stratification is provided in the following table:

Net Note Rate Balance in Cohort

4.382% 1,200,000

4.441% 6,700,000

4.810% 13,000,000

4.923% 14,500,000

5.011% 19,000,000

5.662% 22,000,000

5.717% 22,500,000

5.829% 23,400,000

5.999% 20,100,000

6.091% 18,000,000

6.226% 16,500,000

6.373% 14,000,000

6.498% 11,900,000

6.680% 3,000,000

6.705% 1,500,000

Finally, the prospectus indicates that prepayments should be modeled using the PPC approach with the following ramp: 2-12% CPR over the first 25 months.

1. Use this information to prepare a monthly cash flow statement for your firm to understand what they can expect to earn if they invest in the entire security Expert Answer An expert answer will be posted here. Post a question Your toughest questions, solved step-by-step.

2. Using a money-weighted return calculation, what is your firms expected return on this investment

can you answer two please