K9 fx I J K L A B C D E F G H 1 MPTS Excel Assignment 2 The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an 3 average balance of $100,000 each with 1% origination fee. The annual interest rate on all loans in the pool is 4 12% and all loans require monthly payments. 5 6 7 Initial Pool Balance 8 Annual Interest Rate 9 Maturity (years) 10 Payments per year 11 12 13 Question 1: What price should Blue Algae obtain if the pool is sold immediately to an investor with a 14 required annual return of 11% and no prepayment is expected? 15 Payments from Prepaid Service Cash Flow to 16 Month Borrowers Interest Principal Principal Fee Pool Balance Investor 17 0 Required Return Price 18 19 20 21 22 23 24 1 2 3 4 5 5 6 7 8 25 26 9 27 28 29 30 31 32 10 11 12 13 14 15 K9 fx I J K L A B C D E F G H 1 MPTS Excel Assignment 2 The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an 3 average balance of $100,000 each with 1% origination fee. The annual interest rate on all loans in the pool is 4 12% and all loans require monthly payments. 5 6 7 Initial Pool Balance 8 Annual Interest Rate 9 Maturity (years) 10 Payments per year 11 12 13 Question 1: What price should Blue Algae obtain if the pool is sold immediately to an investor with a 14 required annual return of 11% and no prepayment is expected? 15 Payments from Prepaid Service Cash Flow to 16 Month Borrowers Interest Principal Principal Fee Pool Balance Investor 17 0 Required Return Price 18 19 20 21 22 23 24 1 2 3 4 5 5 6 7 8 25 26 9 27 28 29 30 31 32 10 11 12 13 14 15