The underlying GNMA 15-year mortgage pool has a principal amount of $50 million and an annual yield of 6 percent (paid monthly).Assume that there are no prepayments. What is the first monthly payment on the Interest Only (IO) strip?
A)$3,000,000.
B)$421,928.
C)$250,000.
D)$299,775.
E)$171,928.

Question

Quizplus · Accepted Answer

The first monthly payment on the Interest Only (IO) strip can be calculated by taking the annual yield of 6 percent of the $50 million principal amount and dividing it by 12 (for the 12 months in a year). This calculation is: ($50,000,000 * 0.06) / 12 = $250,000.

The Underlying GNMA 15-Year Mortgage Pool Has a Principal Amount