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

The monthly payment on each mortgage can be calculated using the formula for a fully amortizing loan:
Monthly Payment = (Principal * Interest Rate) / (1 - (1 + Interest Rate)^(-Number of Payments))
For each mortgage, this is:
Monthly Payment = (150,000 * 0.08/12) / (1 - (1 + 0.08/12)^(-30*12)) = $1,100.65
The total monthly payment on the pass-through security is simply 100 times this amount:
Total Monthly Payment = 100 * $1,100.65 = $110,065. Therefore, the correct choice is B.

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