If a Mortgage Pool Consists of Five 10% FRMs Totaling

question 5

Multiple Choice

If a mortgage pool consists of five 10% FRMs totaling $500,000,five 9% FRMs totaling $450,000,and ten 8% FRMs totaling $750,000,what is the weighted average coupon (WAC) rate?

• A)8.75%
• B)8.85%
• C)9.00%
• D)None of the above

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Definitions:

Total Gross Margin

The difference between the sales revenue and the cost of goods sold, indicating the total profitability from goods sold.

Absorption Costing

A pricing approach that encompasses all costs related to production - including direct materials, direct labor, as well as both variable and fixed overhead expenses - within the product’s cost.

Absorption Costing

A method of accounting that includes all manufacturing costs, both variable and fixed, in the valuation of inventory and cost of goods sold.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.