One hundred identical mortgages are pooled together into a pass-through security.Each mortgage has a $150,000 principal,a fixed annual interest rate of 8 percent (paid monthly),and is fully amortized over a term of 30 years.

What is the present value of the mortgage pass-through if the entire pool is repaid after two months and there is no change in interest rates?
A)$14,989,935.
B)$15,089,868.
C)$15,000,000.
D)$15,110,065.

Question

One hundred identical mortgages are pooled together into a pass-through security.Each mortgage has a $150,000 principal,a fixed annual interest rate of 8 percent (paid monthly),and is fully amortized over a term of 30 years.

What is the present value of the mortgage pass-through if the entire pool is repaid after two months and there is no change in interest rates?
A)$14,989,935.
B)$15,089,868.
C)$15,000,000.
D)$15,110,065.

Quizplus · Accepted Answer

The present value of the mortgage pass-through is the sum of the principal amounts of all mortgages, which is $150,000 * 100 = $15,000,000, since the entire pool is repaid after two months without any change in interest rates.

One Hundred Identical Mortgages Are Pooled Together into a Pass-Through