1. What is the Capitalized Equivalent worth of an infinite annuity of $1,000 paid every other year, when the interest rate is 11% annually?
2. Calculate the price of a zero coupon bond that matures in 20 years if the market interest rate is 4 percent. Assume semi- annual compounding
3. Stratify the following Agency mortgages at a deal coupon of 4%. What are the initial pool, pass-through, and PO principal amounts, and what are the initial notional principal and coupon of the IO?
Gross Net Balance (mln $)
4.10% 3.852% 50.343
4.20% 3.934% 101.435
4.30% 4.071% 123.777
4.40% 4.153% 40.123