QUESTION 3 Consider an MPT with WAC=5% with par value of $5,000,000. There is a servicing fee of 0.4% a year for this security. Mark all statements that are true: If market rate is 7%, higher projected prepayment rates will result in higher valuation for the MPT If market rate is 5%, the MPT will sell at $5,000,000 If market rate is 4.6%, the MPT will sell at $5,000,000 If market rate is 7%, the MPT will sell above par value If market rate is 4.6%, higher projected prepayment rates will result in higher valuation for the MPT QUESTION 4 Check all that is true about the SDA default model: If you know the beginning pool balance and assume a 200% SDA, you can calculate what the CDR is for each month SDA function for defaults takes the same shape as a PSA function for prepayments Under the 100% SDA assumption no one defaults when their mortgage is a few months away from being paid out If you know the beginning pool balance and assume a 200% SDA, you can calculate what the CDX is for each month The SDA takes into account maturity of the mortgage SDA stands for standard default assumption