Zero Prepayment Assumption

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Dictionary Says

Definition of 'Zero Prepayment Assumption'

The supposition that scheduled principal and interest will be paid off with no installments. This is typically done as a means of providing a benchmark to gauge other, more complex assumptions. By determining what a product or service will cost without financing, individuals or companies can better budget their resources and plan for future expenditures and/or revenue growth.
Investopedia Says

Investopedia explains 'Zero Prepayment Assumption'

Prepayment assumptions are critical in valuing mortgage-backed securities with various models making assumptions about prepayment patterns under various interest rate changes. Thus, having an established standard can be helpful in determining the fair value of such investments.

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Search results for

'Zero Prepayment Assumption'

  • The Risks Of Mortgage-Backed Securities

    http://www.investopedia.com/articles/mortgages-real-estate/08/weighted-average-mbs.asp
    ... at zero and rising 0.2% each month; thereafter, a level 6% CPR is used. Sometimes,
    however, yields are based on a faster or slower prepayment assumption than ...

  • CFA Level 1 Study Guide - Quantitative Methods - Regression ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/regression-analysis.asp
    ... Options; 14.8 Institutional Investors and Financing Purchases; 14.9 Interest
    Rate Risk; 14.10 Call and Prepayment Risk; 14.11 Reinvestment ...

  • CFA Level 1 Study Guide - Quantitative Methods - Interpreting ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/test-statistics-interpreting-results.asp
    ... Options; 14.8 Institutional Investors and Financing Purchases; 14.9 Interest
    Rate Risk; 14.10 Call and Prepayment Risk; 14.11 Reinvestment ...

  • CFA Level 1 Study Guide - Fixed Income Investments ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/differentiating-between-spreads.asp
    ... Options; 14.8 Institutional Investors and Financing Purchases; 14.9 Interest
    Rate Risk; 14.10 Call and Prepayment Risk; 14.11 Reinvestment ...

  • CFA Level 1 Study Guide - Quantitative Methods - Sampling and ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/sampling-estimation.asp
    ... Options; 14.8 Institutional Investors and Financing Purchases; 14.9 Interest
    Rate Risk; 14.10 Call and Prepayment Risk; 14.11 Reinvestment ...

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