Question

The Z tranche is the residual tranche which receives the ____ priority of the property repayment proceeds.
a medium

b. Mediocre

c. None of the answers

d. Mortgage

e. Highest

2. if rates drop by 200 basis points (2.0%) or so from the time you took out a FRM, is it always better to refinance? Why or why not?

Answer 1

1. A Z tranche is a portion of a structured financial product that only receives payments once all the other tranches have been reteired.Instead of paying interest to the Z tranche,the money is used to pay off the principal of the upper tranches faster.

The Z tranche is the residual tranche which receives the LAST priority of the property repayment proceeds.

So,option (c) none of the answers is correct .

2.One of the reasons of refinancing is that interest rates has gone lower. It is the rule of the thumb that when the interest rates fall by 200 basis points which can be said a drop of 2 percent in interest rates, it can be advisable to refinance as it will reduce the overall payable of your loan as the cost of the loan will go lower.