Overseas Bank Is Pooling 50 Similar and Fully Amortized Mortgages

question 41

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:

Lending Money

The act of giving money to another party with the expectation of receiving the money back plus interest or other benefits.

Collecting Loans

The process of obtaining repayment of a loan or debt, including the principal and any accrued interest.

Investing Activities

Financial activities related to the acquisition and disposal of long-term assets and other investments not considered as cash equivalents.

Financing Activities

Financial transactions primarily involved with funding the company and its capital structure, including issuing debt, paying off debt, and equity transactions.