5 2 6. Consider the following 3-year bond that pay an annual 7% coupon and is eallable on the first coupon date with a call price of S101.5. The interest rates in the tree are the calibrated forward rates plus the OAS - figure below provided. a) What is the price of the callable bond? b) Suppose the non-callable 3-year bond with a 7% coupon is priced $101.75, what is the option cost for the callable bond? 10.02% 7.42% 5.82% 6.72% III. 5.02% 4.62% Opt Cost Bond 3 Z. Consider the following CMBS structure: Ignoring amortization, if the deal loses $75 million what are the remaining balances for the AAA, AA, BBB and NR classes, respectively? Credit Rating Initial Amoint (Smm) Amount after losses AAA 2 AA $150 BBB $95 NR SSS 1 S600 3 4 1 What is the ending subordination level for the AAA class? 5 2 6. Consider the following 3-year bond that pay an annual 7% coupon and is eallable on the first coupon date with a call price of S101.5. The interest rates in the tree are the calibrated forward rates plus the OAS - figure below provided. a) What is the price of the callable bond? b) Suppose the non-callable 3-year bond with a 7% coupon is priced $101.75, what is the option cost for the callable bond? 10.02% 7.42% 5.82% 6.72% III. 5.02% 4.62% Opt Cost Bond 3 Z. Consider the following CMBS structure: Ignoring amortization, if the deal loses $75 million what are the remaining balances for the AAA, AA, BBB and NR classes, respectively? Credit Rating Initial Amoint (Smm) Amount after losses AAA 2 AA $150 BBB $95 NR SSS 1 S600 3 4 1 What is the ending subordination level for the AAA class