Calculator
Example data table
This simple example uses a 100,000 principal bond repaid equally over five annual periods. Its weighted average life is 3.0000 years.
| Period | Time (Years) | Principal Payment | Weight Contribution |
|---|---|---|---|
| 1 | 1.00 | 20,000.00 | 20,000.00 |
| 2 | 2.00 | 20,000.00 | 40,000.00 |
| 3 | 3.00 | 20,000.00 | 60,000.00 |
| 4 | 4.00 | 20,000.00 | 80,000.00 |
| 5 | 5.00 | 20,000.00 | 100,000.00 |
Formula used
Weighted Average Life (WAL) measures the average time required to receive principal back.
WAL formula:
WAL = Σ(Principal Payment × Time in Years) ÷ Σ(Principal Payment)
For level payment structures, the fixed payment is calculated with the standard amortization formula:
Payment = P × r ÷ [1 - (1 + r)^(-n)]
Where P is original principal, r is the periodic rate, and n is total payment periods.
How to use this calculator
- Enter the original principal amount.
- Select a repayment structure: bullet, equal principal, level payment, or custom schedule.
- For structured modes, enter annual rate, term, and payments per year.
- For custom mode, enter one line per principal event using years and principal paid.
- Press Calculate WAL to display results above the form.
- Review the schedule, chart, summary metrics, and export files when needed.
Frequently asked questions
1) What does weighted average life measure?
Weighted average life shows the average time it takes to recover principal. It focuses on principal timing, not just final maturity, so it better reflects repayment structure.
2) How is WAL different from duration?
WAL uses principal repayments only. Duration measures price sensitivity to interest-rate changes and includes present-value weighting from all cash flows, including coupons.
3) Why is a bullet bond WAL close to maturity?
A bullet bond returns nearly all principal at the end. Because principal arrives late, the weighted timing clusters near maturity, making WAL high.
4) Why is an amortizing bond WAL shorter?
Amortizing structures repay principal throughout the term. Earlier repayments pull the weighted timing forward, reducing WAL compared with a bullet structure of the same maturity.
5) Does coupon rate always affect WAL?
Not directly. WAL depends on principal timing. Coupon rate matters only when it changes the principal split under a level payment amortization structure.
6) Can I use irregular custom schedules?
Yes. Enter each principal event as time in years and principal amount. This is useful for step-down, sinking fund, or bespoke structured repayments.
7) What happens if my custom principal total is wrong?
The calculator warns you when scheduled principal differs from original principal. It still computes WAL using the custom principal total entered in the schedule.
8) Should WAL be shown in years or months?
Both are useful. Years help compare against maturity, while months help interpret shorter structures or tighter repayment windows with more precision.