Question 1

In a securitization transaction, what is excess interest spread?

How does EIS help the investor?

In the following example, calculate EIS and explain how it is calculated.

Loan Amount Rs 1,000/-

Loan interest rate 15%
PTC interest rate 7% per year
Tenure 6 years

Question 2

In the following example, cash flow from pool loan @ 18% and cash flow paid to investors
@ 10% are given.

The Rs 3 crore bank deposit @ 7.5% is also given.

Explain:
How the EIS numbers are derived?

How the net profit of Rs 6.11 crore per year is derived?

If there is a default of Rs 4 crore in a year, how much is the profit to the originator?