Notional Amount for the notional IO tranche

CFA Level II
#1

CFAI: Reading 55; Page 422; Question # 28 I am not clear on how they calculated notional amount for the notional IO tranche. Can someone please explain to me?

#2

calculate amount of interest that would be owed. divide that by the interest rate. get the notional principal. post the problem here - do not have the text on hand.

#3

thanks a lot… I got it. I think structured IO Tranches is not covered in Schweser, I noticed when I took EOC questions test from CFAI material.

#4

Notional Amount for an x% IO = (Original Tranche Amount * Excess Interest) / x%

#5

jdane416 Wrote: ------------------------------------------------------- > Notional Amount for an x% IO = (Original Tranche > Amount * Excess Interest) / x% Could you please quote a CFAI page number where you got that from? Can’t seem to find it in the low 400s, thanks!

#6

Nevermind found it on page 393