2) Download the RE611_Pass-throughs.xls spreadsheet (found in the Downloads section of the website). The default entries should be $100,000 average loan size, 10 loans in pool, 10-year term for loans, 10.00% interest rate on loans in pool, 40 pass-through securities, 9.50% coupon rate on pass-throughs, 0% prepayment rate (?xed rate = 1), and a 10% discount rate. a) What is the value of each pass-through security under these default inputs? Is this a premium or discount pass-through? b) What happens to the value of the pass-through if prepayments are 10% per year? Explain why the value is different than in part (a) and why it moved in the direction it did.
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