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The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate
mortgages with an average balance of $100,000 each with 1% origination fee. The annual interest
rate on all loans in the pool is 12% and all loans require monthly payments. Initial Pool Balance
Annual Interest Rate Maturity (years) Payments per year Question 1: What price should Blue
Algae obtain if the pool is sold immediately to an investor with a required annual return of 11% and
no prepayment is expected?

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The Blue Algae Mortgage Company has originated a pool contai.pdf

  • 1. The Blue Algae Mortgage Company has originated a pool containing 75 ten-year fixed rate mortgages with an average balance of $100,000 each with 1% origination fee. The annual interest rate on all loans in the pool is 12% and all loans require monthly payments. Initial Pool Balance Annual Interest Rate Maturity (years) Payments per year Question 1: What price should Blue Algae obtain if the pool is sold immediately to an investor with a required annual return of 11% and no prepayment is expected?