What is the value of the excess servicing

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Reference no: EM131923771

Suppose you have the following information for an auto loan ABS. Using the information in the bulleted list below, find a. The weighted average life for the pool, Tranche A and Tranche B b. Using a B rate =5%, what is the value of the excess servicing?

• Total loan pool = $2,000,000

• Term = 4 years

• (Weighted average) Loan rate = 3.5%; market yield =3.5%

• Servicing cost =1.50%

• PD=20%; LGD=40%; $40,000 buffer over expected loss for B tranche

1. You need to determine the size of Tranche B (Hint: PDxLGDx Loan pool + buffer)

2. Tranche A = Total Loan Pool – Tranche B

• A tranche rate =1.00%

Reference no: EM131923771

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