Question: We consider a MBS issue constructed from a $100 million mortgage pool with the following features: Current balance = $100 million; WAC = 9%; WAM

We consider a MBS issue constructed from a $100 million mortgage pool with the following features: Current balance = $100 million; WAC = 9%; WAM = 356 months; PT rate = 7.8%; Prepayment speed = 120%PSA.

1. What are the CPR and SMM for each month? (show the formula)

2. What is the first and second monthly payment?

3. What is the scheduled principal payment of the first two months?

4. What is the prepaid principal payment of the first two months?

5. What is the cash flow generated by the MBS in the first two months?

6. What is the mortgage balance in the beginning of second and third months?

7. Using the Excel to plot the cash flow for the first 10 months

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