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A CMO is issued from a 200 mil. pool of mortgages. It has 4 tranches listed below. Figure out the loss rate on the Unrated

A CMO is issued from a 200 mil. pool of mortgages. It has 4 tranches listed below. Figure out the loss rate on the Unrated 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 Unrated tranche in percentage points?

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