Assume the following structure of a CMO Tranche A Par Amount 100,000,000 50,000,000 96,500,000 73,500,000 320,000,000 Coupon rate 7.5% 7.5% 7.5% 7.5% Total Suppose tranche C is split to create a floater with a principal of Kshs.80,416,667 and an inverse floater with a principal of Kshs.16,083,333 Required: i) What would be the cap rate for the inverse floater if the coupon rate for the floater is 1-month libor plus 1%. (10 marks) ii) Assuming that (1) the coupon formula for the floater is 1-month libor plus 1% and (2) a floor is imposed on the inverse floater of zero, what would be the cap rate on the floater? (5 marks) Assume the following structure of a CMO Tranche A Par Amount 100,000,000 50,000,000 96,500,000 73,500,000 320,000,000 Coupon rate 7.5% 7.5% 7.5% 7.5% Total Suppose tranche C is split to create a floater with a principal of Kshs.80,416,667 and an inverse floater with a principal of Kshs.16,083,333 Required: i) What would be the cap rate for the inverse floater if the coupon rate for the floater is 1-month libor plus 1%. (10 marks) ii) Assuming that (1) the coupon formula for the floater is 1-month libor plus 1% and (2) a floor is imposed on the inverse floater of zero, what would be the cap rate on the floater