If a bank sells a mortgage portfolio at a price that yields the purchasers a return...
If a bank sells a mortgage portfolio at a price that yields the purchasers a return that is lower than the average yield on the mortgages in the portfolio, the selling price:
Multiple Choice
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is higher than the carrying value of the mortgages on the bank’s books.
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is equal to the carrying value of the mortgages on the bank’s books.
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cannot be determined by examining the carrying value of the mortgages on the bank’s books because the selling price is determined purely by the market.
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is lower than the carrying value of the mortgages on the bank’s books.
Homework Answers
Solution:
If a bank sells a mortgage portfolio at a price that yields the purchasers a return that is lower than the average yield on the mortgages in the portfolio, the selling price "is higher than the carrying value of the mortgages on the bank’s books."
Hence first option is correct.
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