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Answer: The single month mortality rate (SMM) under 100% PSA is exactly 50% of the SMM under 200% PSA
The **false** statement is **D**. - **A is true**: PSA does assume lower prepayment rates for younger mortgage pools. - **B is true**: Under 100% PSA, CPR starts at 0.2% in month 1 and rises by 0.2% per month until it reaches 6% at month 30, after which it stays at 6%. - **C is true**: A higher PSA speed means faster prepayment, so the remaining principal at month 30 is lower under 150% PSA than under 100% PSA. - **D is false**: SMM is **not** exactly proportional to CPR, so 100% PSA does not produce an SMM that is exactly 50% of the SMM under 200% PSA. Therefore, the correct answer is **D**.
Author: Manit Arora
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Q-104.3. With respect to prepayment measures, EACH of the following statements is true EXCEPT:
A
PSA assumes lower prepayment rates for young mortgage pools
B
100% PSA assumes a CPR of 0.2% for the first month, increasing by 0.2% per year per month for the next 29 months when it reaches 6% per year, and remains at 6% per year for the remaining years
C
At month 30, the remaining principal on mortgage pool will be lower under an assumption 150% PSA than under an assumption of 100% PSA
D
The single month mortality rate (SMM) under 100% PSA is exactly 50% of the SMM under 200% PSA
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