Answer question 1

H Jx MPTS Excel Assignment A B D E F G The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an average balance of $100,000 each with 1% origination fee. The annual interest rate on all loans in the pool is 12% and all loans require monthly payments. I K Required Retum Price 4 Initial Pool Balance Annual Interest Rate Maturity (years) Payments per year 1 2 3 Question 1: What price should Blue Algae obtain if the pool is sold immediately to an investor with a required 4 annual return of 11% and no prepayment is expected? S Payments from 16 Prepaid Service Cash Flow to Month Borrowers Interest Principal Principal Fee Pool Balance 17 0 Investor 18 1 19 2 20 3 21 22 5 23 6 24 7 25 8 9 27 10 28 11 29 12 30 13 31 32 15 33 16 34 17 35 18 36 19 37 20 38 21 39 22 23 41 24 MPTS + 14 40 MARA H Jx MPTS Excel Assignment A B D E F G The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an average balance of $100,000 each with 1% origination fee. The annual interest rate on all loans in the pool is 12% and all loans require monthly payments. I K Required Retum Price 4 Initial Pool Balance Annual Interest Rate Maturity (years) Payments per year 1 2 3 Question 1: What price should Blue Algae obtain if the pool is sold immediately to an investor with a required 4 annual return of 11% and no prepayment is expected? S Payments from 16 Prepaid Service Cash Flow to Month Borrowers Interest Principal Principal Fee Pool Balance 17 0 Investor 18 1 19 2 20 3 21 22 5 23 6 24 7 25 8 9 27 10 28 11 29 12 30 13 31 32 15 33 16 34 17 35 18 36 19 37 20 38 21 39 22 23 41 24 MPTS + 14 40 MARA