In a certain CMBS issue $500 million of senior securities and $100 million of mezzanine securities are issued. The coupon on the senior securities is 8%, and that on the mezzanine is 10%. The average contractual interest rate in the underlying mortgage pool is 10%. Assuming annual interest payments and no par value retired or defaulted, how much residual interest will be available for an IO tranche from these two par-valued tranches at the end of the first year?

$16,000,000

$10,000,000

$12,000,000

$14,000,000

2. REITs do not have to pay corporate income taxes, but in return they face what major restriction?

They have to hold at least 50% of their assets in government bonds

They have to sell any properties they develop within four years of the date of completion of construction

Their directors must agree not to accept invitations to spend the night in the White House, except under a Republican administration

They have to pay out 90% or more of their annual taxable income in dividends