Question
A CMO is issued from a 200 mil. pool of mortgages. It has 4 tranches listed below. Figure out the loss rate on the B-rated
A CMO is issued from a 200 mil. pool of mortgages. It has 4 tranches listed below. Figure out the loss rate on the B-rated tranche if 12 million in losses are incurred in the pool of mortgages. (Assume no principal repayments have occurred.)
AAA-rated Tranche $140 million
A-rated Tranche $ 40 million
B-rated Tranche $ 10 million
Unrated Tranche $ 10 million
What is the loss rate on the B-rated tranche in percentage points?
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Short Term Financial Management
Authors: John Zietlow, Matthew Hill, Terry Maness
5th Edition
1516512405, 9781516512409
