Assume that, in the first securitisation round, we pull together $1,000$ identical $1,000-$ loans, and split them into different tranches: $700,000$ in the senior tranche, $200,000$ in the mezzanine tranche, and $100,000$ in the equity tranche. Further assume that we do this with $100$ different loan portfolios, and we pull together the $100$ resulting mezzanine tranches $($adding up to $20,000,000)$ and re$-$securitise them. We create a CDO with a senior tranche of $16,000,000,$ a mezzanine tranche of $3,000,000,$ and an equity tranche of $1,000,000.$ If you buy the ABS mezzanine tranch, which is the maximum default rate of the underlying assets $($assuming defaults are evenly spread across loan portfolios$)$ that you can bear before suffering losses? What if you buy the CDO senior tranche?