is completely paid off, disburse prin- cipal payments to tranche B until it is completely paid off. After tranche B is com- pletely paid off, disburse principal payments to tranches FL and IFL until they are completely paid off. The principal payments between tranches FL and IFL should be made in the following way: 75% to tranche FL and 25% to tranche IFL. After tranches FL and IFL are completely paid off, disburse principal payments to tranche Z until the original principal balance plus accrued interest is completely paid off.   The amount of the par value of the floater tranche will be some por- tion of the $96.5 million. There are an infinite number of ways to cut up the $96.5 million between the floater and inverse floater, and final parti- tioning will be driven by the demands of investors. In Deal 3, we made the floater from $72,375,000 or 75% of the $96.5 million. Therefore, for every $100 of principal received in a month, the floater receives $75 and the inverse floater receives $25. The coupon rate on the floater is set at 1- month LIBOR plus 50 basis points. So, for example, if LIBOR is 3.75% at the coupon reset date, the coupon rate on the floater is 3.75% + 0.5%, or 4.25%. There is a cap on the coupon rate for the floater (discussed later). Unlike the floaters discussed in Chapter 7 whose principal is unchanged over the life of the instrument, the floaters principal balance declines over time as principal repayments are made. The principal pay- ments to the floater are determined by the principal payments from the tranche from which the floater is created. In Deal 3, this is tranche C. Since the floaters par value is $72,375,000 of the $96.5 million, the balance is the inverse floater. Assuming that 1-month LIBOR is the ref-     erence rate, the coupon reset formula for an inverse floater takes the fol- lowingform:   K - L ´ (1-month LIBOR)   In Deal 3, K is set at 28.50% and L at 3. Thus, if 1-month LIBOR is 3.75%, the coupon rate for the month is:   28.50% - 3 ´ (3.75%) = 17.25%   K is the cap or maximum coupon rate for the inverse floater. In Deal 3, the cap for the inverse floater is 28.50%. The L or multiple in the coupon reset formula for the inverse floater is called the "coupon leverage." The higher the coupon leverage, the more the inverse floaters coupon rate changes for a given change in 1- month LIBOR. For example, a coupon leverage of 3 means that a 1- basis point change in 1-month LIBOR will change the coupon rate on the inverse floater by 3 basis points. Because 1-month LIBOR is always positive, the coupon rate paid to the floating-rate tranche cannot be negative. If there are no restrictions