First mortgage investors purchase a 10000 face value mbs


Question: First Mortgage Investors purchase a $100,00 face value MBS carrying a coupon of 5% with a maturity of 30 years.

1) What is the monthly payment on the MBS?

2) How much interest and how much principal will the investor receive if the MBS survives 1 year? 3 years? 5 years? 8 years?

3) What will the MBS sell for in each of the following yield-survival scenarios? Years Survived Yield (%) 1 6.00 3 7.00 6 8.00 8 9.00

4) What prices would you pay for a $100,000 face value, US 9, 30-year bond at the same yields in question 3 above?

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Finance Basics: First mortgage investors purchase a 10000 face value mbs
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