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mortgage-backed securities

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Dr. Washington is very satisfied with the knowledge he has attained during his investment consultation and, with your guidance, he is well on his way to becoming a successful investor in today's securities markets. However, while reading The Wall Street Journal, he came across the termsmortgage-backed securities and investment companies. Being the ambitious learner that he is, Dr. Washington has asked you educate him on these two elements of investing.

Discussion Board Assignment Guidelines:
Using your textbook, course materials, and Web resources, research the following:
o mortgage-backed securities
o investment companies

Next, answer the following questions:
o What are mortgage-backed securities, and who is in charge of issuing them?
o Who is able to purchase mortgage-backed securities? Explain
What is the average minimum price? Why?
o What are two examples of today's major investment companies?

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Solution Summary

Dr. Washington is very satisfied with the knowledge he has attained during his investment consultation and, with your guidance, he is well on his way to becoming a successful investor in today's securities markets. However, while reading The Wall Street Journal, he came across the termsmortgage-backed securities and investment companies. Being the ambitious learner that he is, Dr. Washington has asked you educate him on these two elements of investing.

Discussion Board Assignment Guidelines:
Using your textbook, course materials, and Web resources, research the following:
o mortgage-backed securities
o investment companies

Next, answer the following questions:
o What are mortgage-backed securities, and who is in charge of issuing them?
o Who is able to purchase mortgage-backed securities? Explain
What is the average minimum price? Why?
o What are two examples of today's major investment companies?

Solution Preview

Mortgage based security is a type of asset backed security secured by a mortgage or collection of mortgages and pay periodic payments similar to coupon payments. It is important that mortgage must originate from a regulated financial institution and securities must be rated from an accredited rating agency. Basically, mortgage based security is a securitized interest in a pool of mortgages and instead of fixed coupon payments and principal, results in cash flows from the pool of mortgages. It is different from bond because the the principal repayment is spread over the life of the security, unlike bonds where principal is repaid at ...

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