Weighted Average Life

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A

andrewmac

Having a crisis of confidence here. I need to calculate the average
life of a loan (ignoring interest payments) that has no amortization
until maturity. The loan is for 5 million and matures after 3 years.
So I have this on my spreadsheet:


A B

Year Outstanding Balance
1 1 5,000,000
2 2 5,000,000
3 3 5,000,000

I am using the formula =SUMPRODUCT(B1:B3,A1:A3)/SUM(B1:B3)

The formula is returning 2.00 but the answer must surely be 3 as there
are no amortizations.

Whjat is wrong with my formula.

Any help much appreciated.

Thanks

Andrew
 
Hi Andrew

The formula is returning the correct answer for the data provided.
The AVERAGE of 1 to 3 is 2

--

Regards
Roger Govier

andrewmac said:
Having a crisis of confidence here. I need to calculate the average
life of a loan (ignoring interest payments) that has no amortization
until maturity. The loan is for 5 million and matures after 3 years.
So I have this on my spreadsheet:


A B

Year Outstanding Balance
1 1 5,000,000
2 2 5,000,000
3 3 5,000,000

I am using the formula =SUMPRODUCT(B1:B3,A1:A3)/SUM(B1:B3)

The formula is returning 2.00 but the answer must surely be 3 as there
are no amortizations.

Whjat is wrong with my formula.

Any help much appreciated.

Thanks

Andrew

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