Average Life

The number of years to the point at which half of the Principal of the Bond Issue will have been retired, which in turn gives an indication as to how fast the Principal is expected to amortize.  Generally, the Average Life is equal to (a) the product of the number of Bonds times the number of years from issuance to Maturity divided by (b) the total number of Bonds; for these purposes, a “Bond” is each $1,000 Par amount, regardless of actual denomination.  This term is often used in connection with the Underwriter’s calculations. 

In Contrast With

Weighted Average Maturity

Generally, the weighted average maturity of a bond issue is the sum of the product of the issue price of each maturity of the bond issue multiplied by the number of years from the closing until that maturity date divided by the issue price of the entire bond issue.

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Due Diligence

A term referring to the inquiries and review conducted by either the underwriter and underwriter’s counsel or bond counsel or special tax counsel in connection with the issuance of bonds.