Financial Risk Manager Part 1

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Explanation:

We use the following formulas:
SMM = [prepayment / (beginning balance – scheduled principal payment)]
and $(1 - \text{SMM})^{12} = (1 - \text{CPR})$ .

Prepayment = actual payment – scheduled payment
= (` $10`,500,000 – \`$ 9,800,000) – \ $54`,800 = \`$ 700,000 – \ $54`,800 = \`$ 645`,200

so: ` $645`,200 / (\`$ 10,500,000 – \$54`,800) = 0.06177

and CPR = $1 - (1 - 0.06177)^{12} = 0.5347 = 53.47%$

(Book 3, Module 44.2, LO 44.d)

Explanation:

We use the following formulas:
SMM = [prepayment / (beginning balance – scheduled principal payment)]
and $(1 - \text{SMM})^{12} = (1 - \text{CPR})$ .

Prepayment = actual payment – scheduled payment
= (` $10`,500,000 – \`$ 9,800,000) – \ $54`,800 = \`$ 700,000 – \ $54`,800 = \`$ 645`,200

so: ` $645`,200 / (\`$ 10,500,000 – \$54`,800) = 0.06177

and CPR = $1 - (1 - 0.06177)^{12} = 0.5347 = 53.47%$

(Book 3, Module 44.2, LO 44.d)

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Question 26

If a pool of mortgage loans begins the month with a balance of ` $10`,500,000, has a scheduled principal payment of \`$ 54`,800, and ends the month with a balance of \`$9`,800,000, what is the CPR for this month?

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Last updated: June 29, 2026 at 12:47

6.177%

42.240%

53.472%

66.670%

Financial Risk Manager Part 1

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Question 26 If a pool of mortgage loans begins the month with a balance of `10`,500,000, has a scheduled principal payment of \`54,800, and ends the month with a balance of \$9`,800,000, what is the CPR for this month?

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Question 26

If a pool of mortgage loans begins the month with a balance of ` $10`,500,000, has a scheduled principal payment of \`$ 54`,800, and ends the month with a balance of \`$9`,800,000, what is the CPR for this month?