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.
-For the first monthly payment, what portion is principal and what portion is interest?
A)$100,000 principal and $10,065 interest.
B)$12,000 interest and no principal.
C)$100,000 interest and no principal.
D)$100,000 interest and $10,065 principal.
E)$10,000 interest and $2,000 principal.

Question

Quizplus · Accepted Answer

The total principal of the pool is 100 mortgages * $150,000 = $15,000,000
The monthly interest rate is 8%/12 = 0.0066667
The monthly payment is $150,000 * 0.0066667 / (1 - (1 + 0.0066667)^(-360)) = $1,102.65
For the first payment, the interest portion is $15,000,000 * 0.0066667 = $100,065
The principal portion is the monthly payment minus the interest portion, which is $1,102.65 - $100,065 = $1,002.35.
Therefore, the answer is D, $10,065 interest and $1,002 principal.

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