1.Suppose that the single-monthly mortality rate (SMM) is equal to 0.003. The mortgage balance for a certain month is $250 million, and the scheduled principal payment for the same month is $3 million. What is the assumed prepayment amount for this month?
A) $356,000.
B) $672,000.
C) $741,000.
D) $988,000
2.Suppose that the single-monthly mortality rate (SMM) is equal to 0.004. The mortgage balance for a certain month is $100 million, and the scheduled principal payment for the same month is $2.5 million. What is the assumed prepayment amount for this month?
A) $390,000.
B) $460,000.
C) $890,000.
D) $960,000.
3.The SMM formula is: SMM = 1 – (1 – CPR)1/12. Calculate the single monthly mortality rate (SMM) for month 6, 100 PSA:
A) 0.001006.
B) 0.000837.
C) 0.001259.
D) 0.010366.
4.Given a single monthly mortality rate (SMM) of 0.45 percent, a mortgage pool with a $200,000 principal balance outstanding at the beginning of the 26th month, and a scheduled monthly principal payment of $60.00 for the 26th month, the estimated prepayment is:
A) $450.00.
B) $899.73.
C) $426.38.
D) $567.89.
1.Suppose that the single-monthly mortality rate (SMM) is equal to 0.003. The mortgage balance for a certain month is $250 million, and the scheduled principal payment for the same month is $3 million. What is the assumed prepayment amount for this month?
A) $356,000.
B) $672,000.
C) $741,000.
D) $988,000
The correct answer was C)
The prepayment amount is computed as follows:
Prepayment amount = SMM x (beginning mortgage balance for a month - scheduled principal payment for the month) = 0.003 x ($250 million - $3 million) = $741,000.
2.Suppose that the single-monthly mortality rate (SMM) is equal to 0.004. The mortgage balance for a certain month is $100 million, and the scheduled principal payment for the same month is $2.5 million. What is the assumed prepayment amount for this month?
A) $390,000.
B) $460,000.
C) $890,000.
D) $960,000.
The correct answer was A)
The prepayment amount is computed as follows:
Prepayment amount = SMM x (beginning mortgage balance for a month - scheduled principal payment for the month) = 0.004 x ($100 million - $2.5 million) = $390,000.
3.The SMM formula is: SMM = 1 – (1 – CPR)1/12. Calculate the single monthly mortality rate (SMM) for month 6, 100 PSA:
A) 0.001006.
B) 0.000837.
C) 0.001259.
D) 0.010366.
The correct answer was A)
CPR = 0.2% * 6 = 0.012
SMM = 1-(1-0.012)1/12 = 0.001006
4.Given a single monthly mortality rate (SMM) of 0.45 percent, a mortgage pool with a $200,000 principal balance outstanding at the beginning of the 26th month, and a scheduled monthly principal payment of $60.00 for the 26th month, the estimated prepayment is:
A) $450.00.
B) $899.73.
C) $426.38.
D) $567.89.
The correct answer was B)
Prepayment = (.0045)($200,000 - $60.00) = $899.73.
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