Subject category:
Finance, Accounting and Control
Published by:
Ivey Publishing
Version: 2005-10-20
Length: 10 pages
Data source: Published sources
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Abstract
Mortgages are one of the most complex products offered by financial institutions. This is because valuation of these instruments involves an understanding of certain relatively confusing financial concepts. These are: (a) the present value concept; (b) term versus amortization; (c) stated yield compounding frequency of payment; and (d) mortgagee''s required yield (otherwise called the opportunity cost of capital). This note discusses these concepts.
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Abstract
Mortgages are one of the most complex products offered by financial institutions. This is because valuation of these instruments involves an understanding of certain relatively confusing financial concepts. These are: (a) the present value concept; (b) term versus amortization; (c) stated yield compounding frequency of payment; and (d) mortgagee''s required yield (otherwise called the opportunity cost of capital). This note discusses these concepts.
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