A commercial mortgage-backed security (CMBS) is secured on a set of properties worth a total of $500 million, and its total outstanding balance is $400 million. There are three tranches in this CMBS: a senior tranche with outstanding balance (OSB) $200 million, a mezzanine tranche with OSB $150 million, and a junior tranche with OSB $50 million.

(a) What LTV ratio in a first-mortgage whole-loan issuance would correspond to the default risk structure of each tranche?

(b) How do the risk structures of the mezzanine tranche and the junior tranche differ from that of a first-mortgage whole-loan issuance with the same LTV ratio?

(c) The weighted-average coupon (WAC) for the entire CMBS is 11% per year. The senior tranche commands a coupon of 6% per year, the mezzanine tranche commands a coupon of 10% per year, and the junior tranche commands a coupon of 15% per year. Assuming no default, how much money is left each year after all par-valued tranches have been paid off, and what can the CMBS issuer do with this money?