QUESTION: TRANCHES Assume that $100 million face value of MBS were used to create the following tranches issued by Quick Money" SPV: Amount in million Bond Rating Aa1 Aa2 A1 A2 Baa1 Baa2 Baa3 Ba1 $ 30 $ 20 $ 10 $ 5 $ 5 Allocation in % Risk weights for CAR (APRA APS 120) 20% 20% 20% 20% 50% 50% 50% 100% 100% 100% 350% $ 5 $ 5 $ 5 $ 5 $ 5 $ 5 Assets Cash Liabilities and equity $10 Demand deposits $90 $10 Quick Money Aaa tranche Quick Money Ban tranche Loans (risk weight 100%) $15 Equity $5 $70 b) Show the changes in Small Banks' balance sheet once 15 percent of the Quick Money loan pool is written off. Check the impact upon the tranches and explain what problem Small Bank faces