face value of 12 000 000 will produce a worst case internal rate of return of 3 67 a face value of 50 000 000 will produce a worst case internal rate of return of 6 20 the system preferably is programmed to force class 2 to be of sufficient size to produce some minimum worst case yield the system can also allow class 2 investors to select any size rounded to the nearest 100 000 in excess of 5 714 286 in this example we will assume that the underwriter wants class 2 to have a minimum face value of 12 000 000 face value again the arbitrage profit at this level produces the minimum level of revenue needed to cover fixed and other overhead expenses for the underwriter 3 the system translates the class 1 investor 39 s quote of 6 25 of par into a price of 250 000 6 25 u00d7 4 000 000 250 000 4 the system subtracts the target profit of 0 25 12 000 000 0 25 30 0000 from the 250 000 proceeds and allocates the remaining 220 000 250 000 30 000 220 000 to class 2 5 the system polls the market and determines that the market price of the five year treasury notes used to collateralize the transaction is 100 or 12 million the class 2 investor would have to pay 12 million less the 220 000 or 11 780 000 the system posts on the class 2 screen that 12 million of five year securities are available at a current yield of 7 45 and a worst case yield of 4.