Total Interest
WAL allows one to easily compute the total interest payments, which is given by:
where r is the annual interest rate and P is the initial principal.
This can be understood intuitively as: "A dollar of principal is outstanding for on average the WAL, hence the interest on an average dollar is, and now one multiplies by the principal to get total interest payments".
Read more about this topic: Weighted-average Life
Famous quotes containing the words total and/or interest:
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—David Hume (1711–1776)
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