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Swap

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Assume 5 percent default rate (no recovery) Maintain par value of collateral. Reinvest in same quality bonds. Par Value Test = .9696 *5 = 100x.95 - 90 ... – PowerPoint PPT presentation

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Title: Swap


1
Year 1 Assume 5 percent default rate (no
recovery) Maintain par value of
collateral Reinvest in same quality bonds
Fees
6.3
Swap
LIBOR
8.0
Senior
SUM
2.3
70 bps
(11 8.7)
80M
2.0
Mezzanine
9.0
10M
11
6.96M
-30.4
Equity
(2.3x80 2x10 11x5 - 5x100)/10 6.3
Par Value Test .9696 5 100x.95 - 90
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