Assume you are bullish on a mortgage CDO which has many tranches of debt. Here are the tranches. Maturity 7 Years 6 Years AAA AA BBB BB B 1.20% 1.80% 2.20% 2.60% 5.00% 5.30% 1.10% 1.60% 2.00% 2.40% 4.60% 5.00% You can buy a 7-year bond. The 6-year data is to help you with your analysis. You can't buy the B level, but you can buy the rest. In one year's time, you believe that there is a 50% chance of no change in credit, a 35% chance of a 1 notch upgrade (A to AA for example), and a 15% chance of a 1-notch downgrade (AA to A for example). What tranche would you want to buy? Support your argument with data/analysis. Assume you are bullish on a mortgage CDO which has many tranches of debt. Here are the tranches. Maturity 7 Years 6 Years AAA AA BBB BB B 1.20% 1.80% 2.20% 2.60% 5.00% 5.30% 1.10% 1.60% 2.00% 2.40% 4.60% 5.00% You can buy a 7-year bond. The 6-year data is to help you with your analysis. You can't buy the B level, but you can buy the rest. In one year's time, you believe that there is a 50% chance of no change in credit, a 35% chance of a 1 notch upgrade (A to AA for example), and a 15% chance of a 1-notch downgrade (AA to A for example). What tranche would you want to buy? Support your argument with data/analysis