• Is the amount of a security s value relative to a portfolio. The amount committed to a particular asset class, industry or sector.
| ||Embedded terms in definition|
| ||Referenced Terms|
| ||Weighted average cost of capital: Abbreviated WACC. Reflects the expected average future cost of funds for the upcoming year; found by Weighting the cost of each specific type of capital by its proportion in the firm's capital structure.The average cost of all capital used by a firm. In the context of valuing firms, if the capital is a mixture of debt and equity. The discount rate is called weighted average cost of capital. |
WACC = (1 - tc) * Rd * D/(D+E) + Re * E/ (D+E)
Where tc is the corporate tax rate , Rd is the contractual interest rate on (new) debt, Re is the discount rate on equity, D and E are the market values of debt and equity respectively. The return of all projects accepted by the corporation must exceed the weighted average cost of capital (WACC) to create value for the shareholders.Expected return on a portfolio of all the firm's securities. Used as a hurdle rate for capital investment.
| ||Weighted average coupon: The weighted average of the gross interest rate of the mortgages underlying the pool as of the pool issue date, with the balance of each mortgage used as the Weighting factor.Is the measurement of the gross coupons underlying a Mortgage Backed Security and weighted by outstanding balance of each mortgage.|
| ||Weighted average maturity: The WAM of a MBS is the weighted average of the remaining terms to maturity of the mortgages underlying the collateral pool at the date of issue, using as the Weighting factor the balance of each of the mortgages as of the issue date.Weighted Average Maturity is the mean measurement of the maturity of the underlying collateral weighted by each outstanding balance.|