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John Diego is reviewing two RMBS investments for his firm, First Light Capital, LLC. He has identified a senior tranche from a subprime securitized pool with a AA rating and a senior tranche from a conforming mortgage pool also with a AA rating. How should Mr. Diego rank the investments? A. Conforming senior tranche is undervalued relative to the subprime senior tranche. B. Conforming senior tranche is overvalued relative to the subprime senior tranche. C. Subprime senior tranche is overvalued relative to the conforming senior tranche. D. Neither is overvalued relative to the other. |