Fannie Mae is planning to issue $150 Million in 15-Year Mortgage-Backed bonds paying an 7.5 percent...

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Fannie Mae is planning to issue $150 Million in 15-Year Mortgage-Backed bonds paying an 7.5 percent annual coupon. The bonds are secured by $160 Million in 20-Year fixed rate mortgages. The average interest rate on the pool of mortgages is 9 percent. The following assumptions apply: (1) the default rate on the mortgage pool is 0.75 percent annually, (2) the sinking fund for Fannie Mae earns 7 percent annually, (3) and the prepayment rate is 0% PSA. Assume annual analysis. What is the bond cash flow in Year 1? What is the remaining blance on the mortgage pool at the end of year 2? What is the cash inflow to the issuer from the mortgage pool in Year 3? What is the sinking fund balance at the end of year 4? Fannie Mae is planning to issue $150 Million in 15-Year Mortgage-Backed bonds paying an 7.5 percent annual coupon. The bonds are secured by $160 Million in 20-Year fixed rate mortgages. The average interest rate on the pool of mortgages is 9 percent. The following assumptions apply: (1) the default rate on the mortgage pool is 0.75 percent annually, (2) the sinking fund for Fannie Mae earns 7 percent annually, (3) and the prepayment rate is 0% PSA. Assume annual analysis. What is the bond cash flow in Year 1? What is the remaining blance on the mortgage pool at the end of year 2? What is the cash inflow to the issuer from the mortgage pool in Year 3? What is the sinking fund balance at the end of year 4?

Answer rating: 100% (QA)

1 The bond cash flow in Year 1 is calculated as follows Principal payment 160000000 0075 12000000 In... View the full answer