Using the information above what is the amount of the loss for each tranche if losses due to default over the life of the structure total $25.0 million. A. B. C.
The total loss is first applied to the subordinate tranche 2. With a $25 million loss subordinated tranche 2 is completely liquidated to pay losses and the next $15 million in losses are applied to subordinated tranche 1 leaving it with a balance of $0 million.
