Consider the following structured transaction: Asset Pool: WAC = 12.33% WAM = 60 months (what is the average life where the pool is amortizing over the life of the loans with fixed payment?) Liabilities: Class A: 90% of Pool Par with coupon of 6% Class B: 10% of Pool Par with coupon of 10% Deal Structure includes a 2% reserve account and 1% servicing fee Expected Loss = 5% Assume a 2% negative effect from elevated prepayments (which would be determined from a cashflow model) and a collateral pool and APR distribution as shown in Table 4.2 (pg. 68: R&R). Our analysis will include adverse prepayment stress where the top 30% of loans drop out. Also, assume UIOLI adjustment of 3.33% What should the rating on the bonds be (each class A & B)? Be sure to justify your conclusion. If an AAA senior tranche is required for the market, what might you do to adjust the structure? If we choose to decrease the size of the A tranche to enhance the credit support, what size should that A tranche be? Is the B tranche still investment grade? Consider the following structured transaction: Asset Pool: WAC = 12.33% WAM = 60 months (what is the average life where the pool is amortizing over the life of the loans with fixed payment?) Liabilities: Class A: 90% of Pool Par with coupon of 6% Class B: 10% of Pool Par with coupon of 10% Deal Structure includes a 2% reserve account and 1% servicing fee Expected Loss = 5% Assume a 2% negative effect from elevated prepayments (which would be determined from a cashflow model) and a collateral pool and APR distribution as shown in Table 4.2 (pg. 68: R&R). Our analysis will include adverse prepayment stress where the top 30% of loans drop out. Also, assume UIOLI adjustment of 3.33% What should the rating on the bonds be (each class A & B)? Be sure to justify your conclusion. If an AAA senior tranche is required for the market, what might you do to adjust the structure? If we choose to decrease the size of the A tranche to enhance the credit support, what size should that A tranche be? Is the B tranche still investment grade