CPR where, practice, single

LorrinCFA

Schweser practice exam vol 1, Exam 1 Afternoon Session

Q109 Determind the single month mortality rate for MBS-X for month 20 using 200PSA.

Solution says step 1) find the appropriate CPR by using 6%*(20/30)*2

but where does 6% and 30(denominator) come from?

Thanks.

senlinlang

it given in the CFAI book something like after month 30 CPR is 6
below 30 months CPR is a fraction of the 6.
just check in the book its just a few lienes where they talk about this

scarecrow

CPR is .2% per month up to 30 months, where its at its max

200 is the PSA

Rasec

This is the stuff that is "must know"

CPR is an annual rate

100PSA is standard - at 100PSA, CPR=.2% per month for up to 30 months. After 30 months CPR increases to 6% per month until maturity




And these are the calculations:
CPR for month 20 will be 20*.002=.04 this is 100PSA for month 20
200 PSA would be 2*.04=.08

tikfed

Is it true that regardless of the maturity years, CPR is always .2% per month up to 30 months, where its at its max ?