Question 13 wants to know the CPR for a 360 month loan with a WAM of 356. “During the first 30 months of a pool’s life, where t is the number of months since the mortgages were originated. Since the WAM is 356, 4 months have elapsed.” Then they proceed to calculate the CPR for month #4. Why? If the WAM is 356, 4 months have gone by, so they should be calculating the CPR for month 5, right? I just looked this up in the CFAI books, so I know that’s what WAM means…
4 is correct. if 30 months have gone by, you multiply .002 x 30 to get your 6 percent. so if 4 months have gone by, u multiply by 4. see the schweser problem in book 5, its very clear.