Q7

Given the following information on a MPT (same set-up as previous question), what is the servicing fee payment in year 3? (Round your answer to the nearest dollar)

10 year FRM, fully amortizing, annual payments.

No prepayment or default 100 loans in the pool

Average starting balance of $500,000.00/loan

Mortgage rate 4.50%

Servicing fee of 0.50% of starting outstanding pool balance

(Note:To calculate the servicing fee payment in year 3 you need first the starting pool balance in year 3. You can calculate the starting pool balance in year 3 by finding the new PV given an N, PMT and interest rate (since there is no prepayment). You can also complete the principal paydown schedule via a full amortization schedule worksheet or recursively via Excel or calculator) [Excel is strongly recommended to answer this question]