What is the maximum cap rate on the floater class

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Reference no: EM132038800

Imagine that you have $10,000,000 of notional principal from which floater and inverse floater securities will be created. The underlying mortgages have a WAC of 5%. If the payment rule to the floater class is LIBOR+60bp and $6M is the principal balance allocated to the floater class, what is the maximum cap rate on the floater class? (Round to two decimal places; for example, if your answer is two and a quarter, enter 2.25.) please show me all steps.

Reference no: EM132038800

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