A Financial Institution (FI) originates a pool of 500 30-year mortgages with monthly payments, each averaging $150,000 with a mortgage coupon rate of 8 percent. Assume that the entire mortgage portfolio is securitized to be sold as GNMA pass-throughs. The GNMA credit risk insurance fee is 6 basis points and that the FI’s servicing fee is 19 basis points. Assume no prepayments. What is the total amount of monthly mortgage payments from mortgage borrowers to the pool?

Consider the same four-year, Treasury bond that pays an 4 percent coupon annually and is trading at a yield to maturity of 5% Use the duration to approximate the change in bond price if interest rates increase by 2%

Which of the following statements most accurately characterizes the role of fees in mutual funds?

You have $10,000 to invest and you are considering investing in a mutual fund. The fund charges a front-end load of 2 % and an annual expense fee of .5 % of the average asset value over the year. You believe the fund’s gross rate of return will be 10% per year. If you make the investment, what is your annual rate of return net of expenses during the first year?      

  The above figure documents the total amount of bank lending around the 2008 crisis. Why did bank lending increase during this crisis? (Write 1-3 sentences)

ST loans (6 months) $50M Demand Deposits $300M LT loans (5 years) $200M 3-Month CD $100M 3 month Treasuries $100M Equity $50M 30-year (fixed rate) mortgage $100M   Consider the above bank balance sheet. Using the Repricing (Funding GAP) Model using a 1-year horizon, what is the impact of a 1% rate increase on the net interest income of the bank? How does the assumption about whether demand deposits are rate sensitive impact this effect?

One of the conflicts of interest inherent in investment banking is “spinning,” which investment banks underprice issues to favor some buy-side clients

In an IPO, it benefits the issuer when the underwriter underprices the security.

Investors buying Mortgage-Backed Securities (MBS) issued by Fannie Mae are exposed to credit risk.

Consider the following balance sheet for XYZ bank: Assets Duration = 6 years Assset=$1000 Liabilities Duration = 1 year Liabilities=$900 Equity $100 When interest rates increase from 1% to 2%, you see that the market value of equity for this bank declined by 20%. Which of the following offers an explanation of these facts?