Question

Given a floater and a inverse floater tranche backed by a total mortgage principal amount of $25,000,000, 7% mortgage rate, and even allotments to the floater class and the inverse floater classes (.5 to each of total principal), what is the maximum interest rate cap on the floater class

Answer 1

14%

Step-by-step explanation:

Answer Formula derived in class: Coupon Collateral Fraction Floater = 7% / . 5 = 14%