NO.PZ2023101601000125
问题如下：
King Motors Acceptance
Corporation (KMAC), the finance arm of King Motors, issues an auto-loan
asset-backed security that consists of a senior tranche, denoted Tranche A in
the amount of $50 million and an interest payment of 5 percent, and two
subordinated tranches, denoted Tranches X and Z respectively, each with a face
amount of $35 million. Tranche X pays investors annual interest at a rate of
6.5 percent while Tranche Z pays investors annual interest at a rate of 7.5
percent. Which of the following methods of credit support would NOT affect the
credit quality of subordinated Tranche X?
选项：
A.
The total amount
of the auto loans that make up the asset-backed issue is $125 million.
B.
The weighted
average interest rate on the auto loans making up the pool is 6.4 percent.
C.
Any defaults on
the part of King Motor’s customers will be first absorbed by Tranche Z.
D.
KMAC has a reserve
in the amount of $10 million that will remain on KMAC’s balance sheet.
解释：
An investor’s claim
when purchasing an ABS is solely with the ABS and no longer with the
originator. The fact that KMAC has $10 million set aside means nothing for the
ABS issue if it remains on KMAC’s balance sheet and is not part of the ABS
issue. The other answer choices all describe forms of credit support that will
support at least Tranches X and A, if not all 3 tranches. By having Tranche Z
be subordinate to Tranche X, Tranche X has additional support. Also, loans of
$125 million are used to back asset-backed securities worth ($50 + $35 + $35) =
$120 million, which means the issue, is over-collateralized. The weighted
average interest rate paid on the securities is approximately 6.2%. If the
weighted average interest rate on the loans that make up the pool is 6.4% that
means there is an excess spread between the loans and securities that also
provides support for the entire issue.
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