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. If the entire mortgage pool is repaid after the second month, what is the second month's (liquidating) principal and interest payments?
A)$99,933 interest and $14,989,935 principal.
B)$100,000 interest and $10,065 principal.
C)$100,000 interest and $15,000,000 principal.
D)$99,933 principal and $14,989,935 interest.
E)$12,000 interest and $138,000 principal.

Question

Quizplus · Accepted Answer

Each mortgage has a monthly interest of $1,000 (8% annual rate / 12 months * $150,000). For 100 mortgages, the total interest for the second month is $100,000. The principal remaining after the first month is slightly less than $150,000 per mortgage due to the first month's payment. The total principal repaid after the second month is approximately $14,989,935 for all 100 mortgages.

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