How to Calculate Weighted Average Coupon: A Step-by-Step Guide

How to Calculate Weighted Average Coupon: A Step-by-Step Guide

The weighted average coupon (WAC) is a calculation used in finance to determine the average coupon rate of a portfolio of fixed-income securities. It is calculated by multiplying the coupon rate of each security by its weight in the portfolio and then summing the results.

The WAC is an important measure because it provides a single number that represents the average interest rate that the portfolio will earn. This information can be used to compare different portfolios and to make decisions about how to allocate investments. Historically, the WAC was calculated manually, but today it can be calculated quickly and easily using a financial calculator or spreadsheet software.

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