Is CPR annual rate or montly rate? Please comments
The SMM formula is: SMM = 1 – (1 – CPR)1/12. Calculate the single monthly mortality rate (SMM) for month 6, 100 PSA:
A) 0.000837. B) 0.001006. C) 0.001259.
Your answer: A was incorrect. The correct answer was B) 0.001006.
CPR = 0.2% * 6 = 0.012
SMM = 1-(1-0.012)1/12 = 0.001006
I am getting 0.001006
=1-(1 - .012)1/12
=1-(.98)^0.0833
=1-.999
=.0010
Adjust it like this to account for all answers:
SMM = 1 – [1 – PSA*0.06*month/30]1/12, for month <=30 months, with PSA given in decimal, so 100 PSA is 1.00.
When it’s less than 30 months, you have to use the formula 0.002*Number of months for the CPR. .002*6 = .012
(1-.012)^(.08333) = .998994
1-.998994 = .001006