$1\mathrm{.}3$ You are given information on the following corporate bonds:

Determine the bond which has the highest credit risk.

$1\mathrm{.}4$ A newly issued mortgage$-$backed security $($MBS$)$ comprises a pool of $10$

mortgages of R$700000$ each. The MBS has two tranches, Tranche I and

Tranche II$,$ of R$3\mathrm{.}5$ million each. At the end of the first month, total

payments of R$100000,$ comprising R$25000$ principal and R$75000$

interest, are received. Indicate how the principal and interest payments

are allocated, if sequential tranching is used.