Why the gross coupon interest is calculated by wac multiply


Problem

A. Is my understanding of CPR and SMM correct ? My understanding is that for example, you have a 1-month Mortgage Pass-through Security. The CPR (year percentage) of it is 0.2%. If I want to prepay, the monthly percentage of CPR, which is SMM, is 1-(1-0.2%)^(1/12).

B. Why the gross coupon interest is calculated by WAC multiply the outstanding balance ? What does gross coupon interest mean?

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Financial Management: Why the gross coupon interest is calculated by wac multiply
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