Question

Assume a Mortgage Pass-Through Security (RMBS) with a PTR of 4.5% based on a mortgaged pool of US$100 Million with a WAC of 5.0%, a WAM of 360 Months, and a 400% PSA. The total cash flow paid to the MBS Bondholders in the second month is closest to: A 186,987 B 254,483 C 628,782

Answer 1

The Cashflows to the Mortgage investors is as shown below

Remaining Mortgage Balance	$100		Pass-Through Cash-Flows (Using PSA Prepayment Benchmark)	PSA Parameters
Mortgage Rate	5.000%							Time	CPR Rate
Pass-Through Rate	4.500%		Prepayment Multiplier (in PSA units)	400%		1	0.2%
Initial Monthly Payment	$0.537							30	6.0%
Seasoning (Months)	0		Average Life (Years)	4.55		360	6.0%
Term of Loan (Months)	360
`
	Conditional	Single-Monthly	Beginning		Monthly Interest	Monthly Interest	Scheduled		Total	Ending
	Prepayment	Mortality	Monthly	Monthly	Paid In By	Paid Out To Pass-	Principal		Principal	Mortgage
Month	Rate (CPR)	(SMM) Rate	Balance	Payment	Mortgage Holders	Through Investors	Repayment	Prepayment	Payment	Balance
1	0.80000%	0.06691%	100	0.537	0.42	0.38	0.120	0.067	0.186987	99.81
2	1.60000%	0.13432%	100	0.536	0.42	0.37	0.121	0.134	0.254483	99.56

CORRECT ANSWER IS  $0.254483 MIllion or $254483 (OPTION B)