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Consider a bank that has made 100 mortgage loans of the following form:loan amount:$200000 fixed mortgage rate:6%length/maturity: 30 years payment frequency: monthlyAn investor is contemplating the pu
Consider a bank that has made 100 mortgage loans of the following form:loan amount:$200000 fixed mortgage rate:6%length/maturity: 30 years payment frequency: monthlyAn investor is contemplating the purchase of this pool of mortgage loans. For the investor, the annual rate of return on alternative investments is 42%. Assume that the mortgagepool does not have any default risk and that there are no fees to be paid in the transaction.Calculate the amount that the investor is willing to pay for the pool of mortgage loans.Using the receipts of this sale, how many new mortgage loans of the above form can the bank make? Support your answer with calculation.
