Please use the following additional information for Question…

Please use the following additional information for Questions 38-41: A financial institution originates a pool of 500 30-year mortgages, each averaging $150,000 with an annual mortgage coupon rate of 8 percent. Assume that the entire mortgage portfolio is securitized to be sold as GNMA pass-throughs. The GNMA credit risk insurance fee is 6 basis points and that the FI’s servicing fee is 19 basis points. Question: What is the total amount of monthly mortgage payments from mortgage borrowers to the pool?

Please use the following additional information for Question…

Please use the following additional information for Questions 34-37: Suppose there are three bond ratings: A, B, C and default (D). The ratings-migration probabilities over the next year look like this for a B-rated, 3-year, 4% annual-coupon bond ($100 par value) loan: Rating in 1 year          Probability A                                 0.03 B                                 0.92 C                                 0.03 Default                        0.02 The yield on A rated bonds is 5%; the yield on B rated bonds is 6%; and the yield on a C rated bond is 9%. All term structures are flat (i.e. forward rates equal spot rates). Assume that in default you recover 50% at the time of default. Question: What is the 2% VAR?

Assume that the face values of the following bonds are the s…

Assume that the face values of the following bonds are the same. Rank them in terms of how much of the value they would lose if interest rates rose: (Rank 1 is for the one that loses the most value, 3 is for the one that loses the least value) (1 point for each accurate ranking!) a. A 30-year Treasury bond with an annual coupon and interest rate of 6% b. A 30-year Treasury bond with an annual coupon of 6% and interest rate of 7% c. A 5-year Treasury bond with an annual coupon of 6% trading at par a,b,c ranked as: