Question
BOA issues $200m in CMO. 75% of the issue is floater tranche with index = LIBOR (currently 6%) and margin = 1%. The remaining 25%
BOA issues $200m in CMO. 75% of the issue is floater tranche with index = LIBOR (currently 6%) and margin = 1%. The remaining 25% is inverse floater tranche that is designed to keep the total cost of financing constant. The next year LIBOR falls to 4%. What would be the interest paid to the inverse floater tranche investors?
Please explain! (It is not 6%)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Private Debt Yield Safety And The Emergence Of Alternative Lending
Authors: Stephen L. Nesbitt
2nd Edition
1119944392, 978-1119944393
