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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
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?
10.50% | ||
8.75% | ||
7.25% | ||
9.50% |
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