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  • ARC Models XL

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    Rohit shaw
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    The document shows two models - a 5/95 model and 15/85 model - for an asset-backed security (ARC) that purchased a loan from a bank. For the 5/95 model, the ARC's initial cash investment was -2 and it earned fees of 0.6 each year for 5 years, yielding an internal rate of return (IRR) of 15%. For the 15/85 model, the initial cash investment was -6 and fees were also 0.6 each year, but the IRR was negative 19%.

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    ARC models XL (1)

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    ARC models XL (1)

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    The document shows two models - a 5/95 model and 15/85 model - for an asset-backed security (ARC) that purchased a loan from a bank. For the 5/95 model, the ARC's initial cash investment was -2 and it earned fees of 0.6 each year for 5 years, yielding an internal rate of return (IRR) of 15%. For the 15/85 model, the initial cash investment was -6 and fees were also 0.6 each year, but the IRR was negative 19%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    1 views2 pages

    ARC Models XL

    Uploaded by

    Rohit shaw
    The document shows two models - a 5/95 model and 15/85 model - for an asset-backed security (ARC) that purchased a loan from a bank. For the 5/95 model, the ARC's initial cash investment was -2 and it earned fees of 0.6 each year for 5 years, yielding an internal rate of return (IRR) of 15%. For the 15/85 model, the initial cash investment was -6 and fees were also 0.6 each year, but the IRR was negative 19%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 2

    ARC MODELS LOAN AMOUNT 100

    PROVISION MADE 40
    NET BOOK VALUE 60
    SOLD TO ARC FOR 40

    5/95 MODEL 15/85 MODEL


    ARC'S CASH FLOWS ARC'S CASH FLOWS
    YEAR 0 INITIAL CASH INVT@5% -2 YEAR 0 INITIAL CASH INVT@15%
    YEAR 1 FEES @ 1.5% 0.6 YEAR 1 FEES* @ 1.5%
    YEAR 2 FEES @ 1.5% 0.6 YEAR 2 FEES* @ 1.5%
    YEAR 3 FEES @ 1.5% 0.6 YEAR 3 FEES* @ 1.5%
    YEAR 4 FEES @ 1.5% 0.6 YEAR 4 FEES* @ 1.5%
    YEAR 5 FEES @ 1.5% 0.6 YEAR 5 FEES* @ 1.5%

    IRR 15% IRR

    *simplified example: fees would actually depend o


    -6
    0.6
    0.6
    0.6
    0.6
    0.6

    -19%

    fees would actually depend on NAV of the Security Receipt

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