Describe the cash flow of a mortgage pass-through security
What will be an ideal response?
The cash flow of a mortgage pass-through security depends on the cash flow of the underlying mortgages. The cash flow consists of monthly mortgage payments representing interest, the scheduled repayment of principal, and any prepayments. Payments are made to security holders each month. Neither the amount nor the timing, however, of the cash flow from the pool of mortgages is identical to that of the cash flow passed through to investors.
The monthly cash flow for a pass-through is less than the monthly cash flow of the underlying mortgages by an amount equal to servicing and other fees. The other fees are those charged by the issuer or guarantor of the pass-through for guaranteeing the issue. The coupon rate on a
pass-through, called the pass-through coupon rate, is less than the mortgage rate on the underlying pool of mortgage loans by an amount equal to the servicing and guaranteeing fees.
The timing of the cash flow, like the amount of the cash flow, is also different. The monthly mortgage payment is due from each mortgagor on the first day of each month, but there is
a delay in passing through the corresponding monthly cash flow to the security holders. The length of the delay varies by the type of pass-through security.Because of prepayments, the cash flow of a pass-through is also not known with certainty.
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What will be an ideal response?
A study looked at the number of men and women leaders among the 13,595 managers in 42 countries in their sample. They found that women were more likely to be managers in the
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Christopher Corp is preparing its statement of cash flows using the indirect method
It provides the following information about transactions for the year: Plant assets, net-beginning balance: $111,000 Plant assets, net-ending balance: $148,000 Equipment was purchased for $65,000. Equipment with a net asset value of $12,000 was sold for $18,000. Depreciation Expense of $16,000 was recorded during the year. What was the amount of net cash provided by (used for) investing activities? A) $(47,000 ) B) $47,000 C) $(63,000 ) D) $(39,000 )