CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

Using the Public Securities Association Prepayment benchmark, calculate CPR and SMM.

Correct Answer: 1.8% and 0.1513%

CPR = 90/100 x 6% x 10/30 = 1.8%

SMM = 1 - (1 - CPR)1/12 = 1 - (1 - 0.018)1/12 = 0.1513%

User Contributed Comments 6

User Comment
danlan2 Using PSA benchmark, CPR = 6%*t/30
When PSA=90, CPR=0.9*0.06*10/30=1.8%
pb09 where'd we get 6% and 10/30 from??
bodduna If t<30, cpr = 6%*t/30,
If t>30, cpr = 6%. It is a standard
Catalin92 This came from nowhere...
khalifa92 yeah and there's no emphasize about it in the book. just 3 lines.
Ewan2015 odduna: Thank you for explaining that. Better than the summary that makes no mention of that standard :(
You need to log in first to add your comment.