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  3. 1. (a) compute the cash flow yield and the bond eq

1. (a) Compute the cash flow yield and the bond equivalent yield based on information...

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1. (a) Compute the cash flow yield and the bond equivalent yield based on information of a hypothetical mortgage backed security. It is known the price of the MBS is $4,000,000. Month Cash flow to investor S550,000 550,000 550,000 550,000 550,000 540,000 540,000 540,000 540,000 10 500,000 500,000 12 (b) With above information, will you be able to calculate the average life of the morigage? Can you calculate the duration? (c Suppose principal payments account for 50% of the cash flow in each month, what is the average life of the mortgage? 1. (a) Compute the cash flow yield and the bond equivalent yield based on information of a hypothetical mortgage backed security. It is known the price of the MBS is $4,000,000. Month Cash flow to investor S550,000 550,000 550,000 550,000 550,000 540,000 540,000 540,000 540,000 10 500,000 500,000 12 (b) With above information, will you be able to calculate the average life of the morigage? Can you calculate the duration? (c Suppose principal payments account for 50% of the cash flow in each month, what is the average life of the mortgage

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