I’ve seen two different formulas used both for pools of loans seasoned less than 30 months:
CPR = %PSA * #months / 30 * 6% (mock exam, Q15, AM)
CPR = %PSA * 0.2% * #months (sample exam)
I know that 6% is the mortality rate after 30 months, so can someone explain the intuition specifically behind the first formula? Did I misunderstand the context within which it’s used? Thanks much.