11-30 - Step 1 : find the monthly payment PV = 13,000,000...

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Derivatives November 30 Mortgage Backed Securities *MBS Valuation, using PV terminology -PV = price of MBS -PMT = monthly coupon payment from MBS -I = yield to maturity -n = t = prepayment year assumption -FV = balance of mortgage at prepayment *Example Pool contains $13 million in loans WAM = 22 years WAC = 6.5% required risk adjusted TTM = 7.4% assume no prepayment
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Unformatted text preview: Step 1 : find the monthly payment PV = 13,000,000 FV = 0 n = 264 (22 g n) I = .54% (.065 g i) PMT = 92,682 sto 0 Step 2 : PV of monthly payments at YTM 7.4 g i PV = $12,064,114 Now assume prepaid at 15 years Step 1 PV = 13,000,000 FV = 0 n = 22 g n I = 6.5 g i PMT = 92,682 Step 2 15 g n FV = 6,241,454 Step 3 7.4 g i PV = 12,123,449...
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This note was uploaded on 12/21/2011 for the course SPEA V366 taught by Professor Aleksey during the Fall '11 term at UCSB.

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