As we now that CPR rate is the ANNUALIZED SMM RATE
i. Curriculum states that:“CPR = 15% means that approximate 15% of the oustanding mortgage balance at the beginning of the year is expected to be prepaid by the end of the year”
I don’t agree with this because SMM RATE = PREPAYMENT / (Beginning principal - scheduled principal repayment)
ii. If CPR =15% , SMM rate = 1.25% (15%/12), isn’t it?
What are your opinions?