Question

Mortgage prepayments are best defined by which of the following?

a

paying a monthly mortgage payment before the regular due date

b

paying off the principal faster than required by the amortization schedule

c

paying a cash deposit when purchasing a property

d

paying each mortgage payment as scheduled

e

reducing the mortgage according to a schedule over the life of the mortgage

State of the Economy   Probability E( R )

Boom 0.25 16%

Normal 0.45 10%

Recession 0.30 -8%

a

48.48

b

56.23

c

64.38

d

72.87

e

91.35

You have a portfolio which is comprised of 20 percent of stock A and 80 percent of stock B. What is the portfolio expected rate of return, variance and standard deviation? Show all your work in the space provided (hint: you can copy your response from one you have created and edited in Excel or Word).

State of the Economy	Probability	A	B
Boom	0.15	19%	13%
Normal	0.75	12%	10%
Recession	0.10	-22%	-3%

Answer 1

1.
paying off the principal faster than required by the amortization schedule

2.
What is the portfolio expected rate of return, variance and standard deviation?