the dollar price paid by the buyer in addition to accrued interest is:   0.92 ´ $1,000,000 ´ 0.85 = $782,000   Many trades occur while a pool is still unspecified, and therefore no pool information is known at the time of the trade. This kind of trade is known as a "TBA" (to be announced) trade. In a TBA trade for a fixed- rate passthrough, the two parties agree on the agency type, the agency program, the coupon rate, the face value, the price, and the settlement date. The actual pools underlying the agency passthrough are not speci- fied in a TBA trade. However, this information is provided by the seller to the buyer before delivery. In contrast to a TBA trade, there are speci- fied pool trades wherein the actual pool numbers to be delivered are specified.   Prepayment Conventions and Cash Flows To value a security it is necessary to project its cash flows. The difficulty for an MBS is that the cash flows are unknown because of prepayments. The only way to project cash flows is to make some assumption about the prepayment rate over the life of the underlying mortgage pool. The prepayment rate is sometimes referred to as the prepayment speed, or simply speed. Two conventions have been used as a benchmark for pre- payment rates-conditional prepayment rate and Public Securities Asso- ciation prepayment benchmark.   Conditional Prepayment Rate One convention for describing the pattern of prepayments and the cash flows of a passthrough assumes that some fraction of the remaining principal in the pool is prepaid each month for the remaining term of the mortgage. The prepayment rate assumed for a pool, called the con- ditional prepayment rate (CPR), is based on the characteristics of the pool (including its historical prepayment experience) and the current and expected future economic environment.     The CPR is an annual prepayment rate. To estimate monthly pre- payments, the CPR must be converted into a monthly prepayment rate, commonly referred to as the single-monthly mortality rate (SMM). The following formula is used to determine the SMM for a given CPR:   SMM = 1 - (1 - CPR)¹ ₁₂   Suppose that the CPR used to estimate prepayments is 6%. The cor-