If a mortgage pool consists of five 10% FRMs totaling $500,000,five 9% FRMs totaling $450,000,and ten 8% FRMs totaling $750,000,what is the weighted average coupon (WAC)rate?

Question

Quizplus · Accepted Answer

To calculate the WAC, we need to multiply the outstanding balance of each loan by its interest rate, sum the products, and divide by the total outstanding balance of the pool.

(0.10 x $500,000) + (0.09 x $450,000) + (0.08 x $750,000) = $50,000 + $40,500 + $60,000 = $150,500

Total outstanding balance = $500,000 + $450,000 + $750,000 = $1,700,000

WAC = $150,500 / $1,700,000 = 0.0885 or 8.85%

If a Mortgage Pool Consists of Five 10% FRMs Totaling