What is 'Weighted Average Life  WAL'
The weighted average life (WAL) is the average length of time that each dollar of unpaid principal on a loan, a mortgage or an amortizing bond remains outstanding. Calculating the WAL shows an investor, an analyst or a portfolio manager how many years it will take to receive half the amount of the outstanding principal.
BREAKING DOWN 'Weighted Average Life  WAL'
The time weightings are based on the principal paydowns. A higher dollar amount means the corresponding time period has more weight in the WAL. For example, if the majority of the repayment amount is in 10 years, the weighted average life will be closer to 10 years.
The WAL gives investors or analysts a rough idea of how quickly the bond in question pays out returns. Since rational investors want to receive returns earlier, if two bonds were compared, the investor would select the one with the shorter WAL.
Weighted Average Life Calculation Example
There are four steps involved in calculating an amortizing bond's WAL. Assume a bond makes one payment per year. Over the next five years, the bond's payments are $1,000, $2,000, $4,000, $6,000 and $10,000. The first step of the calculation is to take each of these payments and multiply them by the number of years until the payment occurs. In this example, these values would be:
Year 1 = 1 x $1,000 = $1,000
Year 2 = 2 x $2,000 = $4,000
Year 3 = 3 x $4,000 = $12,000
Year 4 = 4 x $6,000 = $24,000
Year 5 = 5 x $10,000 = $50,000
The second step in the calculation is to add these weighted amounts together. In this example, the total weighted payments equal $91,000. Step three is to add up the bond's total unweighted payments. In this example, the total is $23,000. The final step is to take the total weighted payments and divide this value by the total unweighted payments to get the WAL:
Weighted average life = $91,000 / $23,000 = 3.96 years
The largest payment is the final payment, so the WAL is close to the total fiveyear term of the bond. If, for example, the year two and year five payments were switched, the weighted average life would be much lower:
Year 1 = 1 x $1,000 = $1,000
Year 2 = 2 x $10,000 = $20,000
Year 3 = 3 x $4,000 = $12,000
Year 4 = 4 x $6,000 = $24,000
Year 5 = 5 x $2,000 = $10,000
Weighted average life = $67,000 / $23,000 = 2.91 years

Weighted Average
Weighted average is an average in which each observation in the ... 
Portfolio Weight
Portfolio weight is the percentage composition of a particular ... 
Average Life
Average life is the length of time the principal of a debt issue ... 
Weighted Average Market Capitalization
Weighted average market capitalization refers to a type of stock ... 
Amortization Schedule
An amortization schedule is a complete schedule of periodic blended ... 
Linearly Weighted Moving Average
Linearly Weighted Moving Average is a price momentum calculation ...

Investing
S&P 500 ETFs: Market Weight Vs. Equal Weight (RSP, SPY)
Both S&P 500 and S&P 500 EWI indexes include the same set of stocks, but different weighting strategies give them separate individual properties. 
Managing Wealth
Weighted Average Cost Of Capital (WACC)
Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality 
Investing
4 Ways Simple Interest Is Used In Real Life
Simple interest works in your favor when you're a borrower, but against you when you're an investor. 
IPF  Mortgage
Understanding the Mortgage Payment Structure
When you get a mortgage to buy a home, you need to understand the structure of your payments, so you know how expensive the whole thing will ultimately be. 
Financial Advisor
Example of Applying Modern Portfolio Theory (MPS)
See how an investor can maximize expected return for a given level of risk by altering the proportions of the assets held. 
Investing
The Top 5 High Yield Bond Funds for 2019
Mutual funds and ETFs that invest in highyield bonds yield greater returns than government securities, yet additional and often significant risk. 
Investing
Corporate Bonds for Retirement Accounts
Corporate bonds are usually the preferred choice in retirement accounts. Here are some of the benefits of corporate bonds, and strategies for a portfolio. 
Financial Advisor
Calculate PV of different bond type with Excel
To determine the value of a bond today — for a fixed principal (par value) to be repaid in the future — we can use an Excel spreadsheet.

Using Excel to Calculate a Weighted Average
Though the method of determining weights may vary, weighted averages are used in the calculation of a variety of technical ... Read Answer >> 
How is the value of the S&P 500 calculated?
The S&P 500 is a U.S. market index that gives investors an idea of the overall movement in the U.S. equity market. The value ... Read Answer >> 
What does the S&P 500 index measure and how is it calculated?
Learn about what exactly the S&P measures and why it's used by market participants as a tool to understand the broader stock ... Read Answer >>