Yield To Average Life

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DEFINITION of 'Yield To Average Life'

The yield on a fixed-income security when the average maturity is substituted for the maturity date of the issue. It is particularly useful when a bond has a sinking-fund feature, as average life in this case may be significantly less than the actual number of years until maturity.

BREAKING DOWN 'Yield To Average Life'

Yield to average life enables the investor to estimate the actual return from a bond investment, regardless of the actual maturity. The yield to average life calculation assumes that the bond matures on the day given by its average life and at the average redemption price instead of the par price.

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RELATED FAQS
  1. What is the difference between yields and interest rates?

    The main difference between yields and interest rates is that each term refers to different financial instruments. Yield ... Read Full Answer >>
  2. Are high-yield bonds better investments than low-yield bonds?

    Most bonds typically make periodic payments, known as coupon payments, to the bondholder. A bond's indenture, which will ... Read Full Answer >>
  3. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
  4. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  5. How does the bond market react to changes in the Federal Funds Rate?

    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>
  6. How do I use the holding period return yield to evaluate my bond portfolio?

    The holding period return yield formula can be used to compare the yields of different bonds in your portfolio over a given ... Read Full Answer >>

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