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The Standard PSA Prepayment Curve Assumes Prepayments of 2% and 4

question 11

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The standard PSA prepayment curve assumes prepayments of 2% and 4% in years 1 and 2, then 6% each year thereafter.


Definitions:

Midpoint Formula

A method used in economics and mathematics to calculate the average rate of change or percentage change between two points on a line or curve.

Supply Elasticity

Measures the responsiveness of quantity supplied to a change in the price of a good or service.

Total Revenue

The overall amount of money generated by a firm from its sales activities before any costs or expenses are subtracted.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price; high elasticity indicates a significant response, while low elasticity indicates little to no response.

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