Question $26(5$ points$)$

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A CMBS rating agency calculates that in a severe recession, the probability of loss of commercial mortgages is $60\%$ and the severity of loss is $50\%.$ The agency determines that a CMBS tranche can be rated AAA if it meets the required subordination level for this scenario. What is the required subordination level?

$83\mathrm{.}3\%$

$30\%$

$55\%$

$60\%$