Ladder builder

Three numbers carry the result. The blended estimated yield is the effective annual rate that ties the amount you invest to every payment the ladder makes, on the dates it makes them — a real internal rate of return across all the rungs, so the longer ones count for more. The total income is everything the ladder pays above what you put in. And the average time committed is the weighted average life: how long your money is tied up on average, weighting each payment by size and timing, which is a more honest read of the horizon than the final maturity date alone.

Change one thing at a time and watch which number moves. Adding rungs at the long end usually lifts the blended estimated yield and lifts the average time committed with it — that is the trade being made, stated plainly. Tightening the spacing from twelve months to six brings cash back sooner and lowers both. Neither is right or wrong; they are different answers to how much flexibility you want to keep.

The rates the builder starts with are published national figures, not offers. If a bank has quoted you a real CD rate, or your broker has shown you a real bond, type it into the rate column for that rung and the whole ladder re-prices around it. The full published curve, term by term, is on current CD ladder rates, and the step-by-step version of the setup is on how to build a CD ladder. For how a ladder compares with a single court-approved payment stream, see payment streams versus a bond ladder, and to price one specific stream instead of a whole ladder, use the yield and WAL calculator.

Where the ladder lands relative to other income options is a separate question. Current estimated yields by category sit alongside municipal bonds and the rest of the fixed-income alternatives an income investor is usually choosing between.