Fees Are Us ("FAU") CDO has the following balance sheet ($ in mm, but it doesn't much matter): Assets Treasury Bonds High Yield Bonds $100 $200 Liabilities Senior debt Subordinated debt Equity Total liabs and equity $188 $110 $2 $300 Total Assets $300 Assume the following fixed interest rates on the above instruments: Treasury bonds High Yield bonds Senior notes Subordinated notes 2.10% 5.00% 2.20% 3.50% Management fees are $3. The equity was bought exclusively by the boutique investment banking firm of Golden Sacks of Cash, who put FAU together and continues to manage the CDO. a. What is the return, in dollars and percent, to the equity holders? 8 pts b. How was FAU able to "magnify" for its equity holders the return on the underlying bonds? 1 pt c. Why is the "return" to the equity holders in reality higher than the calculation in "a"? 1 pt