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.

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 ?

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

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