问题如下：
The single monthly
mortality rate (SMM) most likely:
选项：
A.increases as extension risk
rises.
decreases as contraction
risk falls.
stays fixed over time when
the standard prepayment model remains at 100 PSA.
解释：
B is correct. The SMM is a monthly measure of the prepayment rate or prepayment speed. Contraction risk is the risk that when interest rates decline, actual prepayments will be higher than forecast. So if contraction risk falls, prepayments are likely to be lower than forecast, which would imply a decrease in the SMM.
A is incorrect because the SMM is a monthly measure of the prepayment rate or prepayment speed. Extension risk is the risk that when interest rates rise, actual prepayments will be lower than forecast. So if extension risk rises, prepayments are likely to be lower than forecast, which would imply a decrease, not an increase, in the SMM.
C is incorrect because at 100 PSA, investors can
expect prepayments to follow the PSA prepayment benchmark. Based on historical patterns, the
PSA standard model assumes that prepayment rates are low for newly initiated
mortgages and then speed up as mortgages season. Thus, 100 PSA does not imply
that the SMM remains the same but, rather, implies that it will
vary over the life of the mortgage.
C为什么错
