CFA CFA Level 2 The Weight (Take a Month Off)

The Weight (Take a Month Off)

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      Did a fixed income prob in the mock:

      WAM of 356 months.

      Given 310 Pre-PMT assumption, the current Pre-PMT rate of the pool is closest to a CPR of:
      a) 2.5%
      b) 41.3%
      c) 18.6%

      So w (4 months / 30 ) x .06 x 3.1 = .0248 or 2.5%.

      However, when the book explains the concept (Mortgage Passthrough Securities 3.D.4), its example says the WAM is 357, meaning loans are seasoned 3 months. There’s a chart but it says, “Therefore the CPR used is the CPR that corresponds to 4 months. From the PSA, the CPR is 0.8% (4 x 0.2%).

      That seems to directly contradict the way it’s done in the mock. If you used 5 months in the problem, you’d get 3.1%.

      This question may have no answer.


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