Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security.The face value of each mortgage is $100,000 paying 180 monthly interest and principal payments at a fixed rate of 9 percent per annum. If the entire mortgage pool is repaid after the second month, what is the second month's interest and principal payments?
A)$37,441 interest and $13,275 principal.
B)$13,275 principal and $37,441 interest.
C)$13,312 interest and $4,986,786 principal.
D)$4,986,786 interest and $37401 interest.
E)$37,401 interest and $4,986,786 principal.

Question

Quizplus · Accepted Answer

The total face value of the mortgage pool is $5,000,000 (50 mortgages x $100,000 each). The monthly interest rate is 0.75% (9% annual rate / 12 months). The second month's interest is $37,401 ($5,000,000 x 0.75%). If the entire mortgage pool is repaid after the second month, the principal payment is the remaining balance, which is $4,986,786.

Overseas Bank Is Pooling 50 Similar and Fully Amortized Mortgages