Freddie Mac owns 3 mortgages, each of which will pay off $1 million in present value 60% of the time and $0 million 40% of the time. The payoffs of the three mortgages are independent. Freddie Mac issues a CMO where the owner of the senior tranche receives $1 million so long as at least one of the three mortgages does not default (that is, so long as at least one mortgage does pay back $1 million). What is the expected value of this CMO? Choose the nearest answer. A 400,000 B 936,000 C 600,000 D 216,000

Freddie Mac owns 3 mortgages, each of which will pay off $1 million in present value 60% of the time and $0 million 40% of the time. The payoffs of the three mortgages are independent. Freddie Mac issues a CMO where the owner of the senior tranche receives $1 million so long as at least one of the three mortgages does not default (that is, so long as at least one mortgage does pay back $1 million). What is the expected value of this CMO? Choose the nearest answer. A 400,000 B 936,000 C 600,000 D 216,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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After paying all their liabilities, Mark, Lark, and Park had the following balances: Partner Capital Loans P&L ratio Mark P102,960 P90,000 12/25 Lark 89,040 30,000 8/25 Park 68,100 39,900 5/25 Cash available for distribution amounts to P37,800, remaining assets of P382,200 will berealized piecemeal in the next month. How much of the P37,800 cash should Parkreceive?
Same as previous question (Question 4), consider a sequential pay CMO that is backed by 100 mortgages with average balance of $150,000 each. The mortgages have monthly payments with WAM = 30years and WAC = 6%. There is a servicing fee rate of 0.4% and prepayment is according to 150% PSA. Tranche A holds $6,000,000 of the mortgage pool principal at origination, tranche B holds $3,000,000 and tranche Z holds $5,000,000. The rest of the pool principal is held by the SPV as a residual. The SPV has set a pass-through rate (coupon rate net of the servicer/guarantee fee) of 4% for Tranche A, 4.5% for Tranche B and 5% for Tranche Z. What is the cash flow to the residual tranche in month 1?
New Venture Corporation has taken out a $ 5 million, 30-years, 10 percent mortgage on its new manufacturingfacility. How much will New Venture pay each month to discharge his mortgage? How much of the first payment is for interest, and by how much does it reduce the balance owed? How much of the second payment is for interest, and by how much does it reduce the balance owed?
Laura's company buys a property valued at $15,000,000 and finances the purchase with an 70% LTV loan. The bank offers a 25 year amortization schedule with 3.00% interest and monthly payments and requires a balloon repayment after 5 years. If Laura's company holds on to the mortgage at maturity, what will be their balloon payment at the end of the mortgage term? State your answer as a number rounded to the nearest cent (e.g. if you get $13.57654, write 13.58)
Bronn took out a fully amortizing, 5/1 hybrid, adjustable rate mortgage of $ 159026.13 with 18-year maturity. The interest rate is indexed to SOFR and the margin is 3%. At the time of the loan origination, SOFR was 1%. The lender, however, offers a teaser rate of 2% during the first 5 years. Note that the accrual rate is still based on the SOFR and the 3% margin. Bronn's monthly payment during the 4th year equals $ per month.
An FI purchases a $9.982 million pool of commercial loans at par. The loans have an interest rate of 8 percent, a maturity of five years, and annual payments of principal and interest that will exactly amortize the loan at maturity. What is the duration of this asset? A. 2.122822 years. B. 3.072837 years. C. 3.528992 years. D. 2.846472 years. E. 5.000000 years.
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 monthly payment received by investors of the mortgage pass-through if the Fl deducts a 50 basis points servicing fee? $49,237. $50,713. $50,459. $51,200. $52,100.
Marigold Corp. purchased a building on January 2 by signing a long-term $624000 mortgage with monthly payments of $5950. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be $623250. $618050. $618800. $624000.
Tianyang is financing the purchase of a $150,000 home with a $120,000 mortgage. The lender is offering a rate of 5% with 1 point. The point will cost Tianyang A : 1% of $150,000 at the time of the closing. B : 1% of $120,000 over the life of the loan. C : 1% of $150,000 over the life of the loan. D : 1% of $120,000 at the time of the closing.
Consider the following. Two mortgages are available for $500,000.00. Both are paid monthly, compounded quarterly have terms of 5 years and are amortized over 25 years. One has an interest rate of 3% however prohibits any prepayment, the other has an interest rate of 3.1% and allows for prepayment of 10% of the balance per year. If the borrower expects to make a lump sum payment at the end of each year of $400.00 which mortgage costs the least interest by the end of the term?
The mortgage contract states that the debtor must pay a minimum of P100,000 per year on the 7% interest, P1,000,000 loan. The balance would be due by the end of the tenth year as a lump sum. A.) Balloon payment mortgage B.) Rollover mortgage C.) Home equity loans D.) Construction to permanent mortgages
Acosta holdings borrowed P9000 from smith corporation on January1, 1998 and P12000 on January 1,2000.Acosta holdings made a partial payment of P7000 on January1, 2001.It was agreed that the balance of the loan would be amortized by two payments. One on January 1,2002 and one January 1,2003.The second being 50% larger than the first.If the interestrate is 12%, what is the amount of each payment?

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