Contraction risk is a problem for investors in an MBS when interest rates: 

A 100 million dollar mortgage pool of 15-year mortgages has a contract rate of 6%. Compute the scheduled principal payment in millions of dollars to four decimal places. The CPR equals 10%. Compute the SMM as a percent to four decimal places. 

The one-,  two-, and three-year zero-coupon rates are 8.00, 9.50, and 10.00 percent respectively. What is the fixed rate (in percent) on a three-year interest rate swap that makes three annual end of year payments? The floating rate is the one-year LIBOR.  Assume zero default risk.  

Consider the following basic $100 million CDO structure. The senior tranche has a par value of $70 million dollars and a coupon rate of LIBOR + 1.0%. The mezzanine tranche has a par value of $20 million and a coupon rate equal to 8.25%. The equity tranche has a par value of $10 million. The collateral consists of bonds with a coupon 9.75% that mature in ten years. A ten-year interest rate swap with notional principal of $70 million dollars is available that receives fixed rate of 5.25% and pays the LIBOR.  If the one-year LIBOR initially equals 5.0%, what is the cash flow (in millions of $s) to the senior tranche at the end of the first year?

The price of one-year zero coupon bond is 92.593. The price of a two-year bond with a coupon rate of 7.0 percent is 101.711. Both bonds have a par value of 100 dollars. What is the two-year spot rate (in percent)?  

Consider the following basic $100 million CDO structure. The senior tranche has a par value of $70 million dollars and a coupon rate of LIBOR + 1.0%. The mezzanine tranche has a par value of $20 million and a coupon rate equal to 8.25%. The equity tranche has a par value of $10 million. Fees are equal to 5.2% of the equity tranche’s par value. The collateral consists of bonds with a coupon 9.75% that mature in ten years. A ten-year interest rate swap with notional principal of $70 million dollars is available that receives fixed rate of 5.25% and pays the LIBOR. Design a CDO that satisfies the above requirements. What is the potential annual return (in percent)  to the equity tranche assuming no defaults?

An interest rate swap was issued one year ago. If in  one year the term structure of interest rates (used to value an interest rate swap) shifts down, the value of the interest rate swap to a party that pays fixed and receives floating:

A company can invest funds for five years at LIBOR minus 50 basis points. The five-year swap rate is 4%. What fixed rate of interest can the company earn by using the swap? 

According to “The Rise of the Worker Productivity Score” what new types of jobs are recently newly subjected to digital productivity monitoring? 

Reducing the amount of skill needed for a job is know as