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A mortgage-backed security SPV issues a total of $150M of tranched debt: The senior layer contains $100M at an interest rate of LIBOR + 0.5%.
A mortgage-backed security SPV issues a total of $150M of tranched debt: The senior layer contains $100M at an interest rate of LIBOR + 0.5%. The subordinated layer contains $30M at a rate of LIBOR + 1.5%. The equity layer contains the remaining $20M at a rate of LIBOR + 10%. Over ten years the underlying mortgages experience defaults in the amount of 18% of the total portfolio. What dollar amount of the subordinated layer remains?
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