Prepayment speed in the bear sterns model

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Reference no: EM132055686

1. For a 30-year $200,000 fixed rate mortgage with a specified interest rate of 4.25%, the mortgage balance at the end of month 36 (three years) is closest to:

a. $200,000

b. $176,930

c. $189,440

2. The main reason that prepayment speed in the Bear Sterns model is faster than in the baseline 100 PSA model is because:

a. Alt-A borrowers typically prepay more quickly than prime borrowers.

b. Prepayments on newer mortgages increase faster in the Bear Sterns model.

c. House prices in the Bear Sterns model rise and fall unpredictably.

Reference no: EM132055686

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