1. Given the following information about a CMO (same set-up as previous question):

   • 6 million of mortgage pool principal assigned to the floater class. 4 million assigned to the inverse floater class.
   • Floater class coupon rule: LIBOR + 0.2%
   • Inverse floater class coupon rule: 12.5% - L x LIBOR
   • LIBOR in the first month is 2%

   What is the coupon rate of the inverse floater class in the first month?

   		8.75%
   		7.25%
   		9.5%
   		10.50%