Question: You construct FL-IFL tranches with a fixed rate bond as its collateral. Par value of collateral is 50 million and the coupon rate of the

You construct FL-IFL tranches with a fixed rate bond as its collateral. Par value of collateral is 50 million and the coupon rate of the bond is 6%. The structure for FL-IFL is as the following:

TranchePar ValueCoupon Rate (%)

FL25 mil2 + T-bill Rate

IFL25 mil10 - T-bill Rate

In month 100, we have the following information regarding the collateral:

BalancePrincipal PaymentInterest Payment

Month 100$14,824,845$2,912,203$74,124.23

Compute the following items in month 100 for FL and IFL: 1) beginning balances, 2) principal payments, and 3) interest payments. Assume the annual T-bill rate to be 3%.

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