Answer: 53.47%

To calculate CPR (Conditional Prepayment Rate), we need to determine the prepayment amount first: Beginning balance: $10,500,000 Scheduled principal payment: $54,800 Ending balance: $9,800,000 Total principal reduction = Beginning balance - Ending balance = $10,500,000 - $9,800,000 = $700,000 Prepayment = Total principal reduction - Scheduled principal payment = $700,000 - $54,800 = $645,200 Single Monthly Mortality (SMM) = Prepayment / (Beginning balance - Scheduled principal payment) SMM = $645,200 / ($10,500,000 - $54,800) = $645,200 / $10,445,200 = 0.0618 or 6.18% CPR = 1 - (1 - SMM)^12 = 1 - (1 - 0.0618)^12 = 1 - (0.9382)^12 = 1 - 0.4653 = 0.5347 or 53.47% Therefore, the CPR is 53.47%.

Author: LeetQuiz Editorial Team