Suppose a trust is established to securitize $100 million in auto loans that paid 13% interest and

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Suppose a trust is established to securitize $100 million in auto loans that paid 13% interest and the average rate paid on the tranches issued was 10%, whereas financial guarantees to protect against default on the loans cost 1.5%. How much money would the creator of the trust have available to pay for loan servicing and profits if the financial guarantee was purchased?

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Financial Institutions, Markets and Money

ISBN: 978-1119330363

12th edition

Authors: David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias

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