FIN Problem – The Home Loan Corp, Inc (HLC)
The Residence Mortgage Corp, Inc (HLC) originates a pool containing 100 5 12 months mortgages, with a mean stability of $150,000 every. All mortgages within the pool carry a hard and fast rate of interest of 6% (assume all funds are made yearly). HLC now needs to promote the pool of mortgages to the FHLMC. Assuming prepayments are fixed at 10% (of the mortgage pool stability on the finish of the earlier 12 months), what's the value of the pool of mortgages if the FHLMC needs to acquire a charge of return equal to 7%?