Overseas Bank Is Pooling 50 Similar and Fully Amortized Mortgages

question 114

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.

What is the market (present) value of the mortgage pass-through to the investor if the interest rates on this risk category of securities decrease to 7 percent? (Note that investors receive payments net of the 50 basis points servicing fees.)

• A)$4,892,200.
• B)$5,000,000.
• C)$5,152,189.
• D)$5,477,910.

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