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 monthly payment on the mortgage pass-through?
A)$100,000.
B)$110,065.
C)$12,000.
D)$12,000,000.
E)$80,000.

Question

Quizplus · Accepted Answer

To calculate the monthly payment on the mortgage pass-through, we can use the formula for monthly mortgage payments:

Payment = (Principal * Monthly Interest Rate) / (1 - (1+Monthly Interest Rate)^(-Number of Months))

First, we need to calculate the monthly interest rate for the mortgage, which is the annual interest rate divided by 12. So, the monthly interest rate is 0.08 / 12 = 0.0066667.

Next, we need to calculate the total number of months for the mortgage, which is the term of the mortgage (30 years) multiplied by 12 months. So, the total number of months is 30 * 12 = 360.

Now, we can plug in these values into the formula:

Payment = ($150,000 * 0.0066667) / (1 - (1+0.0066667)^(-360))

Payment = $1,244.38

This is the monthly payment for one mortgage. To calculate the monthly payment for the 100 mortgages in the pass-through security, we simply multiply by 100:

Payment = $1,244.38 * 100 = $124,438

Therefore, the monthly payment on the mortgage pass-through is $110,065.

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