QUESTION 7

1. Given the following information about a CMO:

   - 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 3%

   What is the coupon leverage L?

   		1.50
   		4
   		6
   		0.66