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Answer: 1.06%
At month 60, the PSA benchmark CPR has reached its plateau of **6%** for 100% PSA. Therefore for **200% PSA**: \[ \text{CPR} = 2 \times 6\% = 12\% \] Convert CPR to SMM: \[ \text{SMM} = 1 - (1-\text{CPR})^{1/12} = 1 - (0.88)^{1/12} \] \[ \text{SMM} \approx 1.06\% \] Thus the correct answer is **1.06%**.
Author: Manit Arora
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Q-104.2. A pass-through mortgage-based security (MBS) assumes a 200% PSA prepayment speed. The pool has an original weighted average maturity (WAM) of 360 months but now has an age of 60 months (five years). What is the model's assumption, at this month 60, for the single month mortality (SMM) rate?
A
0.92%
B
1.00%
C
1.06%
D
1.14%
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