Question: Why is an assumed prepayment speed necessary to project the cash flow of a pass-through?

Why is an assumed prepayment speed necessary to project the cash flow of a pass-through?

Step by Step Solution

★★★★★

3.46 Rating (178 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

To value a passthrough security it is necessary to project its cash flow The difficulty is that ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

518-B-C-F-B-V (682).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Q:

Why is the cash flow of a residential mortgage loan unknown?

Q:

Describe the cash flow of a mortgage pass-through security.

Q:

Chart 1 below shows the cash flow of a portfolio of financial instruments on a specific future date T as a function of it (at time 0 unknown) future share price S (T). Tid T kontantstrm 25 20 15 10 5...

Q:

7. Why is an assumed prepayment speed necessary to project the cash flow of a pass-through security?

Q:

Why is an assumed prepayment speed necessary to project the cash flow of a pass-through?

Q:

Why is an assumed prepayment speed necessary to project the cash flow of a mortgage pass through security?

Q:

Why is an assumed prepayment speed necessary to project the cash flow of a pass- through? AppendixLO1

Q:

The Cash Flow yield methodology used to analyze Residential Mortgage Backed Securities ( RMBS ) makes which of the following assumptions? Group of answer choices [ A ] All the cash flows can be...

Q:

The Cash Flow yield methodology used to analyze Residential Mortgage Backed Securities (RMBS) makes which of the following assumptions? (A) All the cash flows can be reinvested at a rate equal to the...

Q:

[ A ] All the cash flows can be reinvested at a rate equal to the cash flow yield. [ B ] The RMBS is held to the maturity date. [ C ] The prepayment speed used to project the cash flow will be...

Q:

Which of the following statements is incorrect regarding some unobtrusive measures? a. the wear and tear of equipment in a factory offers a good indication of depreciation. b. the number of Trash...

Q:

Under what conditions are the following true for vectors u and v in IR2 or IR3? (a) ||u + v|| = ||u|| + ||v|| (b) ||u + v|| = ||u|| - ||v||

Q:

What is the coupon rate and yield to maturity on a one - year bond with a par value ( Face value ) of $ 1 , 0 0 0 that pays $ 5 0 in annual interest that you bought for $ 1 , 0 1 0 ?

Q:

How does a bonds current yield differ from its total return?

Q:

What are the two primary factors in determining whether funds will be lent to an applicant for a mortgage loan? AppendixLO1

Q:

a. What are the sources of revenue arising from mortgage origination? b. What are the risks associated with the mortgage origination process? AppendixLO1

Q:

Suppose that the monthly return for two bond managers is as follows: Month Manager I 9% 13% 22% -18% Manager II 25% 13% 22% -24% What is the arithmetic average monthly rate of return for the two...

Q:

Ted McKay has just bought the common stock of Cullumber Corp. Management of Cullumber expects the company expects to grow at the following rates for the next three years: 35 percent, 30 percent, and...

Q:

Finding a present value is the reverse of finding a future value. Which of the following is true about finding the present value of cash flows? O Finding the present value of cash flows tells you how...

Q:

In this assignment, you will use this information to create an income statement and then analyze it for profitability. Selected accounts for Jackson, Inc. are listed below along with their balances...