In the context of mortgage-backed securities, a conditional prepayment rate (CPr) of 8% means that approximately 8% of the outstanding mortgage pool balance at the beginning Of the year is expected to be prepaid:
A) in the current month.
B) by the end of the year.
C) over the life of the mortgages.

Question

Quizplus · Accepted Answer

The CPr is an annualized measure of the expected prepayments on a mortgage-backed security. Therefore, if the CPr is 8%, it means that by the end of the year, approximately 8% of the outstanding mortgage pool balance is expected to be prepaid.

In the Context of Mortgage-Backed Securities, a Conditional Prepayment Rate