hard · Asset-Backed Securities
A Credit Card Master Trust series has a $2,500M invested amount with a Class A coupon of 5.15%, Class B of 5.75%, and Class C of 7.50% (weighted average 5.43%). The portfolio yield is 21.5%, the servicing fee is 2.0%, and annualized charge-offs are 4.5%.
If charge-offs spike to 11.0% and the yield compresses to 18.0%, what is the impact on the monthly excess spread?
- It remains positive at +2.15% due to high portfolio yield.
- It becomes negative at -0.43% per month.
- It triggers immediate principal write-downs for Class A.
- It drops from +9.57% to -0.43% on an annualized basis.
Sign up free to see the explanation and track your rank →
More Asset-Backed Securities practice
- Which vehicle was specifically created by the Tax Reform Act of 1986 for this asset class?
- What is the most likely tax structure?
- Given the real estate collateral, which tax vehicle is standard for this multi-class trans
- An originator transfers auto loans to a bankruptcy-remote in… — What is the economic purpo
- Under ASC 860, which condition must be met for a transfer of receivables from an originato
- Why does it covenant NOT to incur additional debt?
- A CLO manager is actively buying and selling senior secured… — Which phase of the transact
- An analyst observes that a Non-agency Senior RMBS bond with… — How should the credit decom