What will be the cash flow to junior class at end of year

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You are an investor who has bought the B piece of a CMBS deal that has 10% credit support. The pool is comprised of 20 IO loans, each with a balance of $1,000,000 and an interest rate of 5% that are all maturing in 1 year. The loans make annual payments at the end of the year. The coupon on the senior class is 3% and the coupon on the junior class is 5%. If 6 of the 20 loans default, and the recovery rate (proceeds from the foreclosure sale) on each loan that defaults is 50%, what will be the cash flow to the junior class at the end of year 1?

Reference no: EM131337141

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