Question: A certain mortgage pool has $1 billion in par value. The senior (A) tranche has 30% credit support, and the next level (B) has 25% credit support. How much par value of securities was issued in the A tranche? How much par value was issued in the B tranche? How much par value will be lost by each tranche in each of the following scenarios:
a. 20% of the underlying pool par value defaults.
b. 27% of the underlying pool par value defaults.
c. 33% of the underlying pool par value defaults.