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5. Given the ABS & ABS CDO shown below, what is the minimum loss on the portfolio of underlying assets when: ABS Senior Tranche (70%) AAA ABS CDO Senior Tranche (70%) AAA Assets ABS Mezzanine Tranche (25%) BBB ABS CDO Mezzanine Tranche (25%) BBB ABS Equity Tranche (5%) Not Rated ABS CDO Equity Tranche (5%) Not Rated a. Lower two ABS tranches have a 100% loss of principal? b. Senior ABS tranche a 50% has loss of principal? c. Equity ABS CDO tranche has a 100% loss of principal? d. Mezzanine ABS CDO tranche has a 100% loss of principal? e. Senior ABS CDO tranche has a 50% loss of principal? f. Senior ABS CDO tranche has a 100% loss of principal? g. Why is it likely that the AAA-rated tranche of this ABS CDO is more risky than the AAA-rated tranche of the ABS? h. Why are the risks in ABS CDOs misjudged by the market? What did we learn about this in 2007? 5. Given the ABS & ABS CDO shown below, what is the minimum loss on the portfolio of underlying assets when: ABS Senior Tranche (70%) AAA ABS CDO Senior Tranche (70%) AAA Assets ABS Mezzanine Tranche (25%) BBB ABS CDO Mezzanine Tranche (25%) BBB ABS Equity Tranche (5%) Not Rated ABS CDO Equity Tranche (5%) Not Rated a. Lower two ABS tranches have a 100% loss of principal? b. Senior ABS tranche a 50% has loss of principal? c. Equity ABS CDO tranche has a 100% loss of principal? d. Mezzanine ABS CDO tranche has a 100% loss of principal? e. Senior ABS CDO tranche has a 50% loss of principal? f. Senior ABS CDO tranche has a 100% loss of principal? g. Why is it likely that the AAA-rated tranche of this ABS CDO is more risky than the AAA-rated tranche of the ABS? h. Why are the risks in ABS CDOs misjudged by the market? What did we learn about this in 2007