How do you calculate weighted average life of a bond?

How do you calculate weighted average life of a bond?

To calculate the average life, multiply the date of each payment (expressed as a fraction of years or months) by the percentage of total principal that has been paid by that date, add the results, and divide by the total issue size. Then divide the weighted total by the bond face value to get the average life.

What is the weighted average life of a bond?

The weighted average life (WAL) is the average length of time that each dollar of unpaid principal on a loan, a mortgage, or an amortizing bond remains outstanding.

How do you calculate weighted average useful life?

Average weighted useful life of total project = sum of weighted useful lives of all project components/ sum of total estimated project cost.

How do you calculate WAM?

Calculating a WAM is a three-step process:

  1. Add up all credits for subjects where you have gained a result. This includes failing scores.
  2. For each subject completed, multiply the subject’s credits by the final result score. a.
  3. Divide the total reached in 2a by the total credits. This will give you your WAM.

What is the difference between Wal and WAM?

For money market mutual funds, the difference between WAM and WAL is that WAM takes into account interest rate resets and WAL does not. The SEC limits the WAL for money market mutual funds to 120 days. Duration: A measure of the price sensitivity of a bond fund or debt instrument to a change in interest rates.

How is weighted average calculated?

To find a weighted average, multiply each number by its weight, then add the results. If the weights don’t add up to one, find the sum of all the variables multiplied by their weight, then divide by the sum of the weights.

Is weighted average life the same as duration?

Bond duration is the weighted-average time to receive the discounted present values of all the cash flows (including both principal and interest), while WAL is the weighted-average time to receive simply the principal payments (not including interest, and not discounting).

Is 75 a good WAM?

WAM letter grade to number mark conversion: HD – High Distinction = 85. DI – Distinction = 75. CR – Credit = 65.

Why is weighted average life important?

WAL is a measure that can be useful in credit risk analysis on fixed income securities, bearing in mind that the main credit risk of a loan is the risk of loss of principal. All else equal, a bond with principal outstanding longer (i.e., longer WAL) has greater credit risk than a bond with shorter WAL.

Why do we calculate weighted average?

The weighted average takes into account the relative importance or frequency of some factors in a data set. A weighted average is sometimes more accurate than a simple average. Stock investors use a weighted average to track the cost basis of shares bought at varying times.

Is 82 a good WAM?

WAM of 80 or more, Honours First Class (H1) WAM of 70-79, Honours Class 2A (H2A) WAM of 60-69, Honours Class 2B (H2B) WAM of 50-59, pass.