In Regards to the Conditional Prepayment Rate (CPR), Which of the Below

question 11

Multiple Choice

In regards to the conditional prepayment rate (CPR) , which of the below statements is FALSE?

• A) The CPR assumes that some fraction of the remaining principal in the pool is prepaid each year for the remaining term of the mortgage.
• B) The CPR assumed for a pool is based on the characteristics of the pool (including its historical prepayment experience) and the current and expected future economic environment.
• C) To estimate monthly prepayments, the CPR must be converted into a monthly prepayment rate, commonly referred to as the single-monthly mortality rate (SMM).
• D) A CPR of 5% corresponds to a SMM of 0.005143.

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