ADM 3351 Study Guide - Final Guide: Sinking Fund, Capitalization Rate, United States Treasury Security
11 Jul 2014
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A 6,5% (pass-through rate) 30-year mortgage-pass throught security is already seasoned with a weighted average maturity (wam) of 332 motnhs left. The current outstanding balance of 200 000 000$ ad the weighted average coupon (wac) rate is 8%. The interest rates are quoted as annual percentage rate (apr) based on monthly compounding assumption. Assume that the prepayment rate is 150 psa: calculate the total cash flow of the security to the investors for the next 2 motnhs. Fill out the table on the next page ( 15 points: home owners do not want to be locked in high mortgage rates. Briefly explain why financial institution are unwilling to offer fixed rate mortgage for long term. (e. g. 30 years), and how this problem has been solved by the federally sponsored agencies such as fannie mae and freddie. In a collateralized mortgage obligations (cmo), a 6,5% fixed-rate tranche with.
