CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

An investor currently owns an MBS that has a coupon rate of 7% and a pro rata share of principal in the amount of $22,000. The scheduled principal repayment to the investor for the current month is $284 and the conditional prepayment rate (CPR) is assumed to be 9% for the year. Which of the following would best estimate the single monthly mortality rate (SMM) for this pool?
A. 0.721%
B. 0.750%
C. 0.783%
Explanation: SMM = 1 - (1 - CPR)1/12 = 0.783%

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