1. (Mortgage Pass-Throughs) Consider a $400 million pass-through MBS that has just been created (so the 'seasoning' of the pass-through is equal to 0). The underlying pool of mortgages each has a maturity of 20 years and an annual mortgage coupon rate of 6%. The pass-through rate of the mortgage pool is 5%. Assuming a prepayment multiplier of 100 PSA what is the total amount of interest paid to the pass-through investors?

2. (Principal-Only MBS and Interest-Only MBS) Referring to the previous question, suppose the risk-free interest rate suddenly changes from 4.5% to 3.5% and that the pre-payment multiplier changes from 100 PSA to 150 PSA. How much money have you made or lost on your investment in the IO MBS? Submission Guideline: Give your answer in millions rounded to two decimal places. For example, if you compute the answer to be $123,456,789,12, submit 123.46.