Tag Archives: Financial Math

Fast Formulas #1 (Follow-up): New Insight into an Old Formula

Posted on August 19, 2013 by Win Smith

Ugarte (Peter Lorre):              You despise me, don’t you? Rick (Humphrey Bogart):     If I gave you any thought I probably would. – Casablanca If you work in finance, I bet there is something you use all the time, but … Continue reading →

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Puzzle #6: Treasury Debt

Posted on June 4, 2012 by Win Smith

Last week was historic for U.S. Treasury debt.  The yield on the 10-year Treasury dipped below 1.44% to its lowest level ever, and the total debt held by the public* rose to $11,006,251,094,374.26. Some might argue that $11 trillion in public … Continue reading →

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Fast Formulas #3: Pool Average Life with CPR Prepayments

Posted on July 22, 2011 by Win Smith

Fast Formulas #2: Average Life of Mortgage (Amortizing with Balloon) presented a compact formula for calculating the average life of a mortgage that pays as scheduled until it is paid off with a “balloon” payment before the scheduled end of its term.  It occurred to … Continue reading →

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Fast Formulas #2: Average Life of Mortgage (Amortizing with Balloon)

Posted on July 17, 2011 by Win Smith

Fast Formulas #1: Average Life of Mortgage (as Scheduled) showed a quick way to calculate the weighted average life (“WAL”) of a fixed-rate mortgage that pays as originally scheduled.  I found this formula (which is probably not original) by substituting the standard  level … Continue reading →

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Fast Formulas #1: Average Life of Mortgage (as Scheduled)

Posted on July 14, 2011 by Win Smith

The weighted average life (“WAL”) of a mortgage is the average time until principal is repaid.  It is also the average amount of time that the principal is outstanding.  Recall that for a standard fixed-rate mortgage with level payments, the principal … Continue reading →

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Puzzle #4: Bond Pricing

Posted on July 7, 2011 by Win Smith

Here’s another puzzle I’ve used to teach bond math. It’s not hard, but it requires some understanding of bond concepts that I will explain as we go (I beg the patience of bond mavens). Suppose you are the financial advisor … Continue reading →

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Puzzle #3: A Better Answer

Posted on June 2, 2011 by Win Smith

Puzzle #3 asked for the weighted average life (“WAL”) of the principal payments for a 30-year mortgage that is cut short by a balloon payment at 15 years. The following information was provided: $100,000 Principal; 5% Interest Rate; $536.82 Level … Continue reading →

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Puzzle #3: Mortgage with Balloon

Posted on April 15, 2011 by Win Smith

Puzzle #1 posed the question: given a $100,000 mortgage at 5% with monthly payments of $536.82 for 30 years, what is the average life of the principal payments? The puzzle was to be solved with just a few simple calculations. … Continue reading →

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Puzzle #2: Answers to Follow-up Questions

Posted on March 14, 2011 by Win Smith

Puzzle #2 asked how a $6 million mortgage pool with a weighted average LTV of 80% could have a total property value of $9 million when the average LTV implies a value of $7.5 million. Chun Lee NG gave a good general … Continue reading →

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Puzzle #2: Follow-up Questions

Posted on March 4, 2011 by Win Smith

Puzzle #2 asked how a $6 million mortgage pool with a weighted average LTV of 80% could have a total property value of $9 million when the average LTV implies a value of $7.5 million. Chun Lee NG provided a good explanation … Continue reading →

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