Advanced English Dialogue for Business – Average life

Listen to a Business English Dialogue about Average life

Kyle: Hey Emma, do you know what average life means in finance?

Emma: Yeah, I think it’s a measure used to estimate the length of time until a bond’s principal is repaid.

Kyle: That’s correct. It’s an important metric for investors to assess the risk and return of bond investments.

Emma: How is average life different from maturity?

Kyle: While maturity is the date when the bond’s principal is fully repaid, average life considers both principal repayment and the timing of coupon payments.

Emma: So, a longer average life means a longer period until investors receive their principal back?

Kyle: Exactly. A longer average life indicates that the bond’s cash flows are spread out over a longer period of time.

Emma: Are there any factors that can affect a bond’s average life?

Kyle: Yes, factors like interest rate changes, prepayment risk, and credit risk can all impact a bond’s average life.

Emma: Thanks for explaining that, Kyle. Average life seems like an important concept for bond investors to understand.

Kyle: No problem, Emma. It’s crucial for investors to consider average life when evaluating bond investments.