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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