Mortgage Pass Through (MPT) Security You are the issuer of a MPT with the following...
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Mortgage Pass Through (MPT) Security You are the issuer of a MPT with the following characteristics: Assume that $1,000,000 of 10% fixed interest rate mortgages have been pooled together as security for an issue of a pass-through security. The pass-through will carry a coupon, or a pass through, rate of 9.5%. The difference between the pooled mortgage rate and coupon rate, or 0.5%, is the servicing fee. All mortgages in the pooled have a maturity of 10 years and all mortgages payments, or cash flows occur annually. The prepayment for each year is 10% of the pool balance from previous year. The market interest rate at the moment of the issuance is 8.5%. Use the table to guide your analysis. What is the market price of your security
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