Total return for a mortgage-backed and asset-backed security, Financial Management

The total return in case of mortgage-backed and asset-backed securities depend on the projected principal repayment and the interest earned on reinvestment of the projected interest payments and projected principal payments. A prepayment rate over the investment horizon is assumed to calculate the total future returns.

In case of mortgage-backed and asset-backed securities that make monthly payments, the monthly total returns are calculated as follows.

Monthly total returns = (Total future returns/full price) 1/no. of months in horizon - 1

The bond-equivalent annual return can be calculated using the following formula.

Bond-equivalent annual return = 2[(1+ Monthly total return) 6 - 1]

Posted Date: 9/11/2012 1:49:40 AM | Location : United States







Related Discussions:- Total return for a mortgage-backed and asset-backed security, Assignment Help, Ask Question on Total return for a mortgage-backed and asset-backed security, Get Answer, Expert's Help, Total return for a mortgage-backed and asset-backed security Discussions

Write discussion on Total return for a mortgage-backed and asset-backed security
Your posts are moderated
Related Questions
Discount Rate Determinants The discount rate is the firm weighted average cost of capital. It represents the opportunity cost of investing creditors and shareholders funds in o

Cash flow statement: The cash flow statement summarises the flow of cash into and out of the business over a certain period of time. The cash flow statement measures the liq

a) Critical Path: A, B, E and F. Project completed in 11 weeks. Subtract one mark for each error made. Maximum marks can only be awarded if the candidate explicitly indicat

Benjamin Tang currently has holdings in the following three companies:                                                                             E(R)                      σ

Under this approach of Valuation, all cash flows are discounted using single interest rate (discount rate).  For example: Consider the 5-year (7.00 percent) Treas

Q. What do you signify by Receivables Management? Ans. Receivable Management: - The term receivables refer to debt outstanding to the firm by the customers resulting from sale

Testing the Hypothesis To test the null hypothesis, we compare the observed and the expected frequencies. If the actual and the expected values are nearly equal to each other w

What are the benefits of investing via international mutual funds? Answer:  The benefits of investing via international mutual funds consist of: (a) Save transaction or info

discuss the applicability of the operational cycle in vegetable growing business in uganda

What happens to the riskiness of a portfolio if assets with very low correlations (even negative correlations) are combined? How successfully diversification decreases risk reli