Reference no: EM131434975
Answer all questions, and show your work.
Mr. Smith borrows $400,000 from a bank to buy a $400,000 house. He has to pay back principal plus interest next period.
1. The price of the house at the time of payback is uncertain. Suppose the mortgage interest rate is 10%. What is the price below which Smith will in fact default?
2. Suppose that all prices between $300,000 and $600,000 are equally likely. What is the probability of default in that case?
3. Now suppose that Jones makes a 20% down payment. Redo (1) for Mr. Jones.
4. And (2)
5. Suppose there are three mortgages that are exactly like Mr. Jones. Design a set of three mortgage backed pass through securities that use these three mortgages in a pool. What are the possible payoffs, and the probability of each payoff. What is the expected value of the security?
6. Now design a second set of securities, again referencing each of these identical mortgages, in which the highest tranche gets paid after one mortgage fulfillment, the next tranche gets paid off after the second fulfillment and the third gets paid off after the third fulfillment. What are the default probabilities for each of these three tranches?
7. Redo (6) but using three borrowers identical to Mr. Smith (i.e. only 10% down). Comment on the differences in default probabilities between (6) and this scenario.
|
How accurate do you think polls really are
: How accurate do you think polls really are? Do you think we should be using them to predict the outcomes of elections? Why or why not
|
|
Juliette bronson anticipates needing
: Juliette Bronson anticipates needing $620,000 to start a business. If she can earn 4.2 percent compounded annually on her investments, how much money would Juliette have to invest today to have $620,000 in 3 years?
|
|
Compute the takt time for a system
: Compute the takt time for a system where the total time per shift is 490 minutes, there is one shift, and workers are given two 20-minute breaks and 25 minutes for lunch. Daily demand is 262 units.
|
|
What cycle time would match capacity and demand
: What cycle time would match capacity and demand if demand is 179 units a day, there are two shifts of 568 minutes each, and workers are given three half-hour breaks during each shift, one of which is for lunch or dinner?
|
|
Design a set of three mortgage backed pass
: Suppose there are three mortgages that are exactly like Mr. Jones. Design a set of three mortgage backed pass through securities that use these three mortgages in a pool. What are the possible payoffs, and the probability of each payoff. What is t..
|
|
What does your local department do on the topic
: What does your local department do on the topic of having a website? What specific positive things may your department permit or allow with regard to the community
|
|
What you learned regarding international accounting standard
: Prepare a PowerPoint presentation of 10-15 slides in which you summarize what you have learned regarding the international accounting standards of your chosen foreign country as well as of the company you selected.
|
|
Major advantages to an organization using maturity model
: Explain to a fellow student the major benefits of project management oversight to an organization. What are three major advantages to an organization using the maturity model?
|
|
Should sids weight be a factor in how bill decides hiring
: In one of our readings, Prof. Davidson's 2002 article "Leveraging differences for organizational excellence: managing diversity differently" proposes a new diversity model on "what needs to be in place in order to leverage difference, not merely ..
|