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
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    Most bonds typically make periodic payments, known as coupon payments, to the bondholder. A bond's indenture, which will ... Read Full Answer >>
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  4. What is the relationship between the current yield and risk?

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    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>
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