Chapter 11 - 5.5%). In month 15, the CPR is 25% for 100%...

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SOLUTIONS TO PRACTICE QUESTIONS 1. Losses by bond class Total Loss Senior Bond Class Subordinate Bond Class 1 Subordin~~!~on,9-Clls~ 2 a. $15 million zero zero $15 million b. $50 million zero $30 million $20 million c. $90 million $30 million $40 million $20 million
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Chapter 11 445 2. The excess servicing spread is determined as follows: Gross weighted average coupon Servicing fee 9.50% 0.75% 8.75% 7.50% 1.25% = 125 basis points Spread available to pay tranches Net weighted average coupon Excess servicing spread 3. For month 1 the CPR is 4% as per the prospectus. Since we are interested in 150% Pl'C, the CPR in month 1 is 6% (1.5 x 4%). For month 2, 1.5% is added to 4%, so 100% Pl'C is 5.5%. Then 150% Pl'C is a CPR of 8.3% (= 1.5 x
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Unformatted text preview: 5.5%). In month 15, the CPR is 25% for 100% n-c and for 150% n-o, the CPR is 37.5% (1.5 x 25%). For all months after month 15, the CPR is 37.5%. Month CPR Month CPR Month CPR 1 6.0% 11 28.5% 30 37.5% 2 8.3% 12 30.8% 125 37.5% 3 10.5% 13 33.0% 150 37.5% 4 12.8% 14 35.3% 200 37.5% 5 15.0% 15 37.5% 250 37.5% 6 17.3% 16 37.5% 275 37.5% 7 19.5% 17 37.5% 300 37.5% 8 21.8% 18 37.5% 325 37.5% 9 24.0% 19 37.5% 350 37.5% 10 26.3% 20 37.5% 360 37.5% 4. a. SMM = 0.02 = 0.025 2.5% 1-[0.02 x (11-1)] 0.017 b. AB S = .,-----::-::-. ..". ...,.,::--. ..,. ..,--,----.,. ..,. .-:: 1 + [0.017 x (21-1)] 0.0127 = 1.27%...
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Chapter 11 - 5.5%). In month 15, the CPR is 25% for 100%...

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