Assume That a Mortgage Pool Follows a Specified PSA Prepayment

question 41

Multiple Choice

Assume that a mortgage pool follows a specified PSA prepayment schedule. Given this, the cash flow yield on the mortgage pool will do which one of the following?

• A)equal the average interest rate of the mortgages contained in the pool
• B)equal the anticipated cash flow for the next year divided by the current value of the pool
• C)equate the present value of the future cash flows from the pool to the current value of the pool
• D)equate the average interest rate on the mortgages to the current market rate of interest
• E)equal the current market rate of interest

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Definitions:

Conscious

The state of being aware of and able to think about one's own existence, sensations, thoughts, surroundings, and experiences.

Preconscious

In Freudian psychology, thoughts and feelings not currently in awareness but can be easily brought to consciousness.

Reaction Formation

A defense mechanism where an individual behaves in a manner opposite to their actual feelings or impulses.

Association

A connection or correlation between two or more entities, often used in psychology to refer to the link between thoughts, feelings, or experiences.