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Question
The coupon rate promised to investors on securities issued against a pool of loans is 6.5%. The default rate on the pool of loans is expected to be 3.5%. The fee to compensate a servicing institution for collecting payments on the loan is 2%. Fees to set up credit and liquidity enhancements are 5%. The residual income on this pool of loans is 7%. What is the expected yield on this pool of loans?
A. 24%
B. 12%
C. 10%
D. 6.5%
E. None of the options is correct.
Answer
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Related questions
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