Tag Archives: Weighted Average Life

Fast Formulas #3 (Follow-up): The Derivation

Posted on July 1, 2013 by Win Smith

Fast Formulas #3: Pool Average Life with CPR Prepayments presented Formula 3.1., a compact formula for the weighted average life of a homogeneous loan pool assuming a constant prepayment rate.  I wrote that the formula took a few pages and “a couple … Continue reading →

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Puzzle #7 (Follow-up): Treasury Island, Part 1

Posted on March 5, 2013 by Win Smith

In Puzzle #7: The Mysterious Islands, I told the story of two islands where each individual’s remaining lifespan can be perfectly predicted. The lifespans on Uniformia are evenly distributed, and their average remaining life expectancy will gradually decline over time. … Continue reading →

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Fast Formulas #5: Quasi-Geometric Series (The Other Trick)

Posted on March 1, 2013 by Win Smith

In Fast Formulas #3: Pool Average Life with CPR Prepayments,  I described Formula 3.1., a compact formula for the average life of a prepaying loan pool, and  I wrote that the formula had been found by using  “a couple of … Continue reading →

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Fast Formulas #3: The Spreadsheet

Posted on August 21, 2012 by Win Smith

Fast Formulas #3: Pool Average Life with CPR Prepayments showed a shortcut for finding the weighted average life (“WAL”) of a homogenous pool of loans assuming a constant prepayment rate.  The shortcut, Formula 3.1, takes just a few steps to calculate … 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 #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 #1: Epilogue

Posted on March 2, 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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