1. Describe an arbitrage CDO. Explain what a credit enhancer is and how it works.
2. Explain the difference between the spot and forward markets. Give an example when someone may wish to use the spot market; to use the forward market.
3. Alisha can afford car payments of $264 a month for 60 months. The bank will lend her money to buy a car at 6% APR compounded monthly (0.5% per month). How much money can he afford to borrow?