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An asset-backed security has the following expected monthly payments. The price of the security is $12,381,256. MonthPayments:
An asset-backed security has the following expected monthly payments. The price of the security is $12,381,256.
MonthPayments:
1) $1,178,4057
2) $1,112,5692
3) $1,107,3908
4) $1,022,5643
5) $1,096,4439
6) $988,5114
7) $1,254,90010
8) $967,0345
9) $1,095,67811
10) $1,006,2926
11) $1,043,21112
12) $898,451
(a) Calculate the cash flow yield, expressed as an annualized rate based on monthly compounding.
(b) Convert the yield in (a) to a bond equivalent yield (i.e., an annualized rate based on semi-annual compounding).
(c) What assumptions typically are required to estimate the cash flows in an amortizing security?
