Thierry S
New Member
The cash flows in a 3-tiered securitization can be broken out into the inflows from collateral and the outflows to the investors. The terminal cash flows in the final year are the last interest payment plus principal and revovery of defaulted assets. Suppose the original loan pool included 50 loans with $1 million par value each and a fixed coupon of 7%. Also assume that the par value for the senior and junior tranches was 80% and 15%, respectively, with the equity investors contributed the remaining 5%. If the total amount available to satisfy all claims is $55 million, what is the total equity claim?
a) $0
b) $5 mn
c) $7.5 mn
d) $ 10 mn
it is similar to this https://forum.bionicturtle.com/threads/p2-t6-313-three-tiered-securitization-structure-cashflows-malz-9-2.7013/ but the total amount available is given.
Which question is most likely to appear in the exam?
The answer is c) $ 7.5mn
senior tranche: 0.8*50 = $40 mn < $55mn => no impairment
mezzanine tranche: 0.15*50 = $7.5 mn < ($55mn - $40 mn) => no impairment
remaining for equity claim in million = $55 - ($40+$7.5) = $7.5 mn
a) $0
b) $5 mn
c) $7.5 mn
d) $ 10 mn
it is similar to this https://forum.bionicturtle.com/threads/p2-t6-313-three-tiered-securitization-structure-cashflows-malz-9-2.7013/ but the total amount available is given.
Which question is most likely to appear in the exam?
The answer is c) $ 7.5mn
senior tranche: 0.8*50 = $40 mn < $55mn => no impairment
mezzanine tranche: 0.15*50 = $7.5 mn < ($55mn - $40 mn) => no impairment
remaining for equity claim in million = $55 - ($40+$7.5) = $7.5 mn
