Select the correct statement(s) regarding a CDO.

I. To offer sufficient protection, over 50% of the deal is structured as either equity or junior tranches; the senior tranche is less than 50%.
II. The majority of the underlying collateral typically pays a fixed rate.
III. The equity tranche receives a floating-rate payment.
IV. The junior tranche receives a floating-rate payment.

Correct Answer: II

I. Over 50% of the deal is structured as a senior tranche.

III. The equity tranche receives any remaining interest that is received from the collateral but not paid to the debt tranches.

IV. The junior tranche receives a fixed-rate payment.