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half-life definition - finance
The point at which half of the principal has been repaid in a mortgage-backed security. A typical time assumed for half-life is 12 years. If interest rates fall, that time decreases because more homeowners will refinance their mortgages, which will have the effect of paying off the principal more quickly than normal. If interest rates rise and refinancing slows, then the inverse is true.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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