Overseas Bank Is Pooling 50 Similar and Fully Amortized Mortgages

question 56

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.
• E)$5,675,005.

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Definitions:

Polysaccharide

A complex carbohydrate composed of a long chain of monosaccharide units bonded together, serving various functions including energy storage and structural roles.

Nucleotide

A molecule consisting of one or more phosphate groups, a 5-carbon sugar (ribose or deoxyribose), and a nitrogenous base (purine or pyrimidine).

ATP

See adenosine triphosphate.

Cysteine Residues

The amino acid units in proteins that contain a thiol group, often involved in the formation of disulfide bonds that stabilize protein structure.