Regarding conditional prepayment rates

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Reference no: EM132032564

1. Regarding conditional prepayment rates (CPRs) and single monthly mortality (SMM) rates, which of the following is most accurate?

a. SMM is computed from the CPR to compute monthly prepayments

b. SMM is computed from the CPR to compute changes in loan maturity

c. CPR is computed from the SMM to compute monthly prepayments

2. Mr. Houston made a mistake in his research about the nature of mortgage loans. Which of the following statements regarding mortgage loans as compared to straight bonds is least accurate?

a. Servicing fees on mortgage pools decline as the loan matures

b. The final mortgage payment does not include the par amount of the loan

c. Mortgage borrowers do not get call options.

Reference no: EM132032564

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