Weighted Average Coupon

Posted in Finance, Accounting and Economics Terms, Total Reads: 51
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Definition: Weighted Average Coupon

Weighted average coupon is average of the mortgages taken according to their weights under the mortgage backed security. Its current wac can differ than original wac as mortgages pay at different rates and different tenures of period. It is an important piece of information because analyst uses it for estimation of health of the securities and assets. It is an relative tool for estimation in the financial world.


Example

60% for mortgage is at 10% rate. Whereas the 30% is at 9% and the remaining 10% is at 8.5%

Then Wac= .6*10+.3*9+.1*8.5 = 9.55 %



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