Assume you have a CDO which had an equity trache that is 5% of all assets and a Mezzanine tranche that is 20% of all assets and a Senior tranche that is 75% of all assets. If the firm assets lose 10% of their total value, what does this mean for the Mezzanine tranche?

1. They will not be affected
2. They will lose 25% of their investment
3. They will lose 50% of their investment
4. The will lose 100% of their investment