Weighted average life (WAL) is a measure of the expected life of a loan, assuming that repayments are made as scheduled. It is used to price loans with level payments, such as mortgages, and can be used to compare loans of different types.
The weighted average life is calculated by weighting each payment by the amount of time until it is made, and then taking the sum of these weighted payments. This sum is then divided by the sum of all the weights. The weights used are usually the number of years until the payment is made.
For example, consider a loan with monthly payments of $100 for 10 years. The first payment is made one year from now, the second payment is made two years from now, and so on. The weighted average life of this loan would be:
((1 x $100) + (2 x $100) + (3 x $100) + ... + (10 x $100)) / (1 + 2 + 3 + ... + 10) = 55
This formula can be used to compare loans of different types. For example, a 30-year mortgage has a longer weighted average life than a 15-year mortgage, because the payments are spread out over a longer period of time.
The weighted average life is affected by the interest rate on the loan. A higher interest rate will result in a higher weighted average life, because the payments will be spread out over a longer period of time.
The weighted average life can be used to price loans with level payments. For example, a loan with a weighted average life of 10 years would be priced at 10% per year.
What is the weighted average life of a 30 year mortgage?
Assuming that you are referring to a 30 year fixed rate mortgage, the weighted average life (WAL) of the loan would be 30 years. This is because the interest rate and monthly payments on a 30 year fixed mortgage remain constant for the entire life of the loan. Therefore, each year of the loan is weighted equally and the average life of the loan is equal to the term of the loan.
What is weighted average coupon? A weighted average coupon (WAC) is a measure of the average interest rate paid on a bond or other fixed-income security, weighted by the market value of each security.
WAC is calculated by adding the market value of each security and dividing by the total market value of the securities. The resulting figure is the WAC.
WAC is generally used as a measure of the average interest rate paid on a bond portfolio. It is also sometimes used as a measure of the average interest rate paid on a group of bonds with similar characteristics.
WAC can be affected by changes in the market value of the securities in the portfolio. For example, if the market value of a security increases, the WAC will increase.
Weighted average coupon is one of several measures of average interest rate. Other measures include average coupon and yield to maturity. How do you calculate WAL in Excel? To calculate the weighted average loan (WAL) in Excel, you will need to use the SUMPRODUCT and SUM functions. The SUMPRODUCT function multiplies range of cells and returns the sum of the products, while the SUM function simply returns the sum of a given range of cells.
We will use the following data to calculate the WAL:
Loan 1: $100,000 at 5% interest
Loan 2: $200,000 at 7% interest
Loan 3: $300,000 at 9% interest
The weighted average loan can be calculated using the following formula:
=SUMPRODUCT(A1:A3,B1:B3)/SUM(A1:A3)
In this formula, A1:A3 is the range of cells containing the loan amounts, and B1:B3 is the range of cells containing the interest rates. The result of this formula is 7.33%, which is the weighted average loan.
Is weighted mean and weighted average the same?
No, weighted mean and weighted average are not the same. Weighted mean is a type of average that takes into account the importance, or weight, of each value. Weighted average is a method used to calculate the average of a group of values in which each value is assigned a weight. How do you calculate weighted average spread? Weighted average spread is calculated by weighting the individual spreads of each loan by its respective loan balance, and then taking the average of those weighted spreads.