Suppose we have a new type of MBS to accommodate the short-term investor. This new MBS security instrument contains only 5-year mortgages (in reality are rare if non-existent). ACME, a private secondary mortgage market, has pooled together ten $100,000 5-year mortgage loans.

Calculate the duration for this MBS pool assuming annual compounding for three years at 10 percent interest which a. is a "zero coupon".

Answer rating: 100% (QA)

SOLUTION We have a pool of 10 mortgage loans each for 100000 So the total face ... View the full answer