CPR Calculator

Formula

The formula to calculate the Constant Prepayment Rate (CPR) is:

\[ \text{CPR} = \frac{\text{ARM}}{\text{OB}} \times 100 \]

Where:

$\text{ARM}$ is the Annualized Rate of Monthly Prepayments
$\text{OB}$ is the Outstanding Balance at the beginning of the period

What is a Constant Prepayment Rate (CPR)?

A constant prepayment rate (CPR) measures the compounded percentage of a loan amount that is expected to be prepaid in the coming year. It's commonly used for home equity loans and student loans.

Example Calculation

Let's consider an example:

Annualized Rate of Monthly Prepayments (ARM): $10,000
Outstanding Balance (OB): $100,000

Using the formula to calculate the CPR:

\[ \text{CPR} = \frac{10,000}{100,000} \times 100 = 10\% \]

This means that the Constant Prepayment Rate (CPR) is 10%.