UNIT 3 ASSIGNMENT
As an assistant vice president at a regional bank, your boss has tasked you and the other AVPs to work in
a group to acquire $100 million of residential mortgages to be securitized in a pass-through MBS. There
must be between 250–300 mortgages in the portfolio, none of them with a maturity below 200 months
or greater than 360 months. In the interest of time, your boss suggests that the group assign group
members to find (meaning create some hypothetical) a group of diverse mortgages (meaning each with
a different interest rate, principal amount, and maturity) and then as a group, aggregate each member’s
mortgages into a pool to calculate the portfolio Weighted Average Cash (WAC) and Weighted Average
Maturity (WAM). Your group’s task is to provide your boss with a summary spreadsheet that shows the
individual mortgages and the portfolio’s WAC and WAM calculations, along with a memo of at least 300
words that explains the following:
• The number of residential mortgages in the portfolio and the range of principal values, interest
ates, and maturities
• The residential mortgage portfolio’s WAC and WAM
• A discussion of the WAC of the pass-through MBS the group has created and whether it
epresents a coupon rate indicative of a high credit quality or a lower credit quality pool of
mortgages
o Include in the discussion the MBS issue’s spread over the comparable Treasury rate.
o Include in your analysis at least 1 outside source for the Treasury rate.
This assignment includes a spreadsheet and a 3 page paper in APA Format. Please do not forget the title
page.