CFA CFA Level 2 Calculate CFY from given cash flow

Calculate CFY from given cash flow

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      @vincentt next time just shoot a question this way 🙂

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      @vincentt – since this is a MBS, the cashflow repayment include schedule principal repayments, hence FV=0. So at the end of life of an MBS, it should be expected that the whole mortgage is repaid in full.

      The maturity of MBS is uncertain as there are prepayment risks, i.e. people prepaying more than the minimum amount each month, hence shortening the life of the mortgage.

      It’s always related to bond equivalent yield, so make sure you get these 2 concepts right.

    • Avatar of vincenttvincentt
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        • CFA Level 3
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        @sophie ahh #-o that’s right principal is included in the monthly payment! That explains the term “diminishing return”, shouldn’t have studied for long hours. thanks Sophie!

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        No problem @Vincentt!

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