medium · Asset-Backed Securities
A lender funds $1.0B of consumer loans at a 12% WAC. Unsecured corporate debt costs the lender T + 350 bp, while an ABS structure costs T + 65 bp (weighted).
If servicing is 1% and expected losses are 2.5%, what is the net spread improvement from using securitization?
- 8.50%
- 2.85%
- 11.35%
- 0.65%
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