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A corporation is considering a securitization and isconsidering two possible credit enhancement structures backed by apool of automobile loans. Total principal value underlying theasset-backed security is $300 million.Principal Value for:Structure IStructure IIPool of automobile loans$301 million$305 millionSenior class$280 million$270 millionSubordinated class$20 million$30 millionAnswer the below questions.(a) Which structure would receive a higher credit ratingand why?b) What forms of credit enhancement are being used inboth structures?
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