Williams Mortgage

Due December 12 Please find information attached to solve questions. Just need written answers (2 or 3 sentences) to satisfy those and equations where necessary.

Only needs to be 3 pages at most

1.     Is the monthly mortgage payment on Jerry’s mortgage?

2.     What is the most significant risk Jennifer faces in this deal?

3.     How can Jennifer hedge this risk?

4.     Suppose that in the next three months the market rate of interest rises to 6.2 percent.

A.    How much will Max be willing to pay for the mortgage?

B.    . What will happen to the value of Treasury bond futures contracts? Will the long or short position increase in value?

5.     Suppose that in the next three months the market rate of interest falls to 4.6 percent.

A.    How much will Max be willing to for the mortgage?

B.    What will happen to the value of Treasury bond futures contracts? Will the long or short position increase in value?

6.     Are there any possible risks Jennifer faces in using Treasury bond futures contracts to hedge her interest rate risk?