CFA Level I · CFA Level I Exam · Mortgage-Backed Security (MBS) Instrument and Market Features
A pass-through pool is described at 150 PSA. Compared with 100 PSA, the conditional prepayment rate (CPR) at month 30 and later is most likely:
At 150 PSA the prepayment path is 1.5 times the 100 PSA benchmark. Since 100 PSA reaches 6% CPR at month 30 and stays level, 150 PSA reaches 9% CPR at month 30 and remains constant thereafter, rather than continuing to rise.
- A6.0% at month 30 and then rising each month
- B9.0% at month 30 and constant thereafterCorrect
- C9.0% at month 30 and rising each month
Explanation
100 PSA ramps CPR by 0.2% per month to 6% at month 30, then holds 6%. 150 PSA is 1.5 times this: 9% at month 30 and constant afterwards. The 6% option is 100 PSA, and no PSA speed keeps rising after month 30.
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