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.

What is the monthly payment received by investors of the mortgage pass-through if the FI deducts a 50 basis points servicing fee?
A)$49,237.
B)$50,713.
C)$50,459.
D)$51,200.

Question

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.

What is the monthly payment received by investors of the mortgage pass-through if the FI deducts a 50 basis points servicing fee?

What is the monthly payment received by investors of the mortgage pass-through if the FI deducts a 50 basis points servicing fee?
A)$49,237.
B)$50,713.
C)$50,459.
D)$51,200.

Quizplus · Accepted Answer

The monthly mortgage payment for each mortgage is calculated using the formula for a fixed-rate mortgage payment. The monthly interest rate is 9%/12 = 0.0075. The payment for each mortgage is $1,014.32. For 50 mortgages, the total payment is $50,716. After deducting the 50 basis points (0.5%) servicing fee, the payment to investors is $50,716 - $254.32 = $49,237.

Overseas Bank Is Pooling 50 Similar and Fully Amortized Mortgages