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Conditional Prepayment Rate - CPR
       
 
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Conditional Prepayment Rate - CPR

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Conditional Prepayment Rate - CPR
Conditional Prepayment Rate or CPR is a measure of the rate of payments from a Bond that pays principal payments in excess of scheduled payments (so-called prepayments).
    
CPR is defined as the annualized rate of principal payments beyond the regularly scheduled payments, and is stated as a percentage of outstanding amount of the Security or loan minus the scheduled payments. Such bonds include mortgage-backed securities, CMO's, and ABS, which prepay at some rate usually dependent on the level of Interest rates.
    
A loan prepayment rate that is equal to the proportion of the principal of a Pool of loans that is assumed to be paid off prematurely in each period.
    
The calculation of this estimate is based on a number of factors such as historical prepayment rates for previous loans that are similar to ones in the Pool and on Future economic outlooks.
    
The CPR can be used for a variety of loans. For example, mortgages, student loans and pass-through securities all use CPR as estimates of prepayment.
    
Typically, CPR is expressed as a percentage. For example, a Pool of mortgages with a CPR of 8% would indicate that for each period, 8% of the Pool's remaining principal outstanding Will be paid off.
Posted by  Privatebanking.com
 
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