Suppose That ABSs Are Created from Portfolios of Subprime Mortgages

question 11

Multiple Choice

Suppose that ABSs are created from portfolios of subprime mortgages with the following allocation of the principal to tranches: senior 80%,mezzanine 10%,and equity 10%.(The portfolios of subprime mortgages have the same default rates.) An ABS CDO is then created from the mezzanine tranches with the same allocation of principal.Losses on the mortgage portfolio prove to be 16%.What,as a percent of tranche principal,are losses on the senior tranche of the ABS CDO

• A) 50%
• B) 60%
• C) 80%
• D) 100%

---

Definitions:

Heredity

The passing of traits from parents to offspring through genes.

Gender

A social construct that refers to the roles, behaviors, activities, and attributes that a given society considers appropriate for men, women, and other gender identities.

Major Categories

Principal classifications or groupings within a broader system or classification scheme, used to organize complex information into more manageable segments.

Philanthropic Programs

Initiatives or projects undertaken by an organization or individual aimed at promoting the welfare of others, typically through charitable donations or social activities.