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Q-104.1. Under a constant maturity mortality approach, the monthly rate of prepayment (p) on a mortgage (aka, single month mortality rate, SMM) is found to be 0.40%. What is the annualized conditional prepayment rate (CPR)? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

Use the standard conversion from SMM to CPR:

\text{CPR} = 1 - (1-\text{SMM})^{12}

With SMM = 0.40% = 0.004:

\text{CPR} = 1 - (0.996)^{12} \approx 1 - 0.9529 = 0.0471 = 4.71\%

So the closest answer is 4.70%.

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Q-104.1. Under a constant maturity mortality approach, the monthly rate of prepayment (p) on a mortgage (aka, single month mortality rate, SMM) is found to be 0.40%. What is the annualized conditional prepayment rate (CPR)?

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