Financial Risk Manager Part 1

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Explanation:

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.

Explanation:

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.

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Q-104.3. With respect to prepayment measures, EACH of the following statements is true EXCEPT:

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MManit

Last updated: April 18, 2026 at 11:32

PSA assumes lower prepayment rates for young mortgage pools

0.0%

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

0.0%

At month 30, the remaining principal on mortgage pool will be lower under an assumption 150% PSA than under an assumption of 100% PSA

The single month mortality rate (SMM) under 100% PSA is exactly 50% of the SMM under 200% PSA

100.0%