PRACTICE 1. Assets with a principal of $10,000,000 were packaged into 3 tranches: Senior (75%), Mezzanine (20%) & Equity (5%). Mezzanine tranche was then repackaged into ABS CDO Senior (60%), Mezzanine (30%) & Equity (10%). Please fill-in the Table of Estimated Losses below: Losses on Senior Losses on Subprime portfolios Losses on Mezzanine Tranche of ABS CDO Losses on Equity Tranche of ABS Losses on Mezzanine Tranche of ABS CDo Tranche of ABS CDO 7% 11% 15% 19% 2. You are given $100 million and an assignment to design ABS and ABS CDO that fit the following criteria: A default of 5% in the collateral mortgages will wipe out 50% of the ABS equity tranche, and additional 6.25% default will wipe out 50% of the ABS CDO equity tranche, an additional $5,000,000 default will wipe out 50% BS CDO mezzanine. ABS CDO senior tranche is twice the size of ABS CDO mezzanine. Draw a chart of BS and ABS CD0 tranches and allocate appropriate $ amounts