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Question: A corporation is considering a securitization and is considering two possible credit enhancement structures backed by a pool of automobile loans. Total principal value underlying the asset-backed security is $300 million.

Principal Value for:	Structure I	Structure II
Pool of automobile loans	$304 million	$301 million
Senior class	$250 million	$270 million
Subordinated class	$50 million	$30 million

(a) Which structure would receive a higher credit rating and why?

(b) What forms of credit enhancement are being used in both structures?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92800394

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