Overseas Bank Is Pooling 50 Similar and Fully Amortized Mortgages

question 31

Multiple Choice

Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security.The face value of each mortgage is $100,000 paying 180 monthly interest and principal payments at a fixed rate of 9 percent per annum. For the first monthly payment, what are the interest and principal portions of the payment?

• A)$37,500 principal and $13,213 principal.
• B)$37,500 interest and $13,213 principal.
• C)$37,500 principal and $7,809 interest.
• D)$37,500 interest and $7,809 principal.
• E)$37,500 interest and $17,756 principal.

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Definitions:

Voting Shares

Securities affording the owner the ability to vote on important company decisions, including who gets elected to the board.

IAS 36

An International Accounting Standard that prescribes the procedures for accounting for impairments of assets.

Amortized

The gradual reduction of a debt or capital cost over a period, especially through regular payments covering interest and part of the principal.

Intangible Assets

Non-physical assets owned by a business, such as patents, trademarks, copyrights, and goodwill, which have economic value due to their rights or advantages in business operations.