Question
If a tranche spread is 55 basis points and the fixed coupon is 60 basis points, which of the following happens when a trader buys
If a tranche spread is 55 basis points and the fixed coupon is 60 basis points, which of the following happens when a trader buys protection?
Group of answer choices
The trader pays an estimate of the present value of 5 basis points per year and then pays 60 basis points per year
The trader pays an estimate of the present value of 5 basis points per year and then pays 55 basis points per year
The trader receives an estimate of the present value of 5 basis points per year and then pays 55 basis points per year
The trader receives an estimate of the present value of 5 basis points per year and then pays 60 basis points per year
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Financial Markets and Institutions
Authors: Anthony Saunders, Marcia Cornett
6th edition
9780077641849, 77861663, 77641841, 978-0077861667
