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Given the following information about a CMO: - $1 million of mortgage pool principal assigned to the floater class. $15 million assigned to the inverse floater class. - Floater class coupon rule: LIBOR + 0.2% - Inverse floater class coupon rule: 12.5% - L x LIBOR - LIBOR in the first month is 3% What is the coupon leverage L? Round your answer to two decimal points (e.g. if your answer is 1/3, write 0.33).

Sagot :

Answer:

The answer is "0.07"

Explanation:

L or the voucher Leverage has been the mortgage pool proportion of such class to the loan pool assigned to the reverse float class. Leverage

Mortage Main swimming pool = 1 million Floaters

The principal reverse float class mortgage pool = 15 million

Voucher Leverage or L = Floater category mortgage pool / Inverse Hook shot class mortgage pool As tried to explain before,

Cupon Leverage or L [tex]= \frac{1\ million}{ 15 \ million}= 0.066667[/tex]

therefore, the coupon leverage or L = 0.07.

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