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hi
i had a look at the suggested answer an i cant figure ot where did they get 9.4% and an 14.4% reduction .
Also the vale of 18.83 is arrived from 20.90 – 2.07 right so that will be the balance of TOTAL A+B+C loan?
Would the seniority rank changes if now that the return for sub is 11.5%?
So the order would be:
A
Sub
B
—-
C will be the residual?Please tell me which year’s exam this question was in (I can’t remember the name of every question 🙂 )
Currently the income (before service charge) is 22.00M.
For the subordinated certificates to get nothing, the income (before service charge) would have to be lower by 3.17M (which is 18.83M). This is a fall of 3.17/22.00 = 14.4%
The ranking does not change – the subordinated certificates always get whatever is left after paying the others. This might be higher or might be lower, depending on what the total income is.
oh okay… thank you i understand so much now. I asked around for answer but none could do it like you. You’re the best!
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