Problem set 2 solutions (1).docx

# Soln starting pool

This preview shows pages 2–3. Sign up to view the full content.

SOLN: Starting Pool Balance=(50*100,000)+(100*250,000)+(50*300,000)=45,000,000 [(50*100,000*0.04)+(100*250,000*0.0425)+(50*300,000*0.050)]/45,000,000=(200,000+1,0 62,500+750,000)/45,000,000 4.47 Question 4. If these 200 loans are pooled to create a MPT, what is the starting pool balance in dollars? Assume the loans are not seasoned before securitization. SOLN: Starting Pool Balance=(50*100,000)+(100*250,000)+(50*300,000)=45,000,000 Question 5. Now imagine that these loans whose origination values are listed above are seasoned for 6 months before creating a MPT. What is the starting pool balance? Assume that all loans are fixed rate, fully amortizing and make monthly payments. Additionally, assume that in the time period between origination and securitization every borrower makes exactly their scheduled payment (no prepayments, no defaults). Express your answer in dollars rounded to the nearest cent, if necessary. (Hint: calculate balance outstanding on each segment of the pool after making 6 payments.) SOLN: You know if the loans are seasoned, then the starting pool balance has to be less than 45,000,000 Group 1 PV=100,000; FV=0; N=360; i/y=4/12 CPT PMT=-477.41 Change N to 6, CPT FV=-99,128.27 Multiply by 50 (number of this type of loan)= 4,956,413.60 Group 2 PV=250,000; FV=0; N=180; i/y=4.25/12 CPT PMT= -1,880.70 Change N to 6, CPT FV=-243,975.20 Multiply by 100 (number of this type of loan)= 24,397,519.93 Group 3 PV= 300,000; FV=0; N=360; i/y=5/12 CPT PMT= -1,610.46 Change N to 6, CPT FV= -297,814.56 Multiply by 50 (number of this type of loan)= 14,890,727.81 Sum Group 1+ Group 2 + Group 3= 44,244,661.34

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Question 6. What is the WAM of this pool at issuance? Assume that the loans are not seasoned at the time of securitization. Express your answer in number of months SOLN: 260 Months [(5M/45M)*360]+ [(25M/45M)*180]+[(15M/45M)*360] 40+100+120=260
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern