1.Assume there are a bunch of mortgages that are supposed to pay principal pay

    1.Assume there are a bunch of mortgages that are supposed to pay principal payments and interest payments of $2100
    during the year are pooled together and sold as securities. These securities have tranches which include I II III and IV. Tranche I is supposed to collect
    $1000 in principal tranche II is supposed to collect $500 in principal tranche III is supposed to collect $300 in principal and Tranche IV is supposed to
    collect $200 in principal. Tranche IV has the highest yield assuming that all principal is paid. The annual total interest cost is $100 and this is paid
    before principal is paid to any of the tranches.

    Assume that homeowners default on their mortgages and they only pay $1200 during the year. How much does tranche II
    collect in principal?

    a)$0

    b)$100

    c)$200

    d)$300

    e)$400

    f)$1200

    g)$1400

    h)$2100

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