1. What is Weighted Average Interest Rate?

The Weighted Average Interest Rate (WAIR) calculates the average interest rate across multiple balances, where each balance's interest rate is weighted by its proportion of the total balance. This provides a more accurate representation of the overall interest cost or return.

2. How Does the Calculator Work?

The calculator uses the WAIR formula:

Where:

• \( Balance_i \) — Individual balance amount ($)
• \( Rate_i \) — Individual interest rate (%)
• \( Total\ Balance \) — Sum of all balances ($)

Explanation: The formula calculates the proportion of each balance to the total, multiplies by its respective rate, and sums these weighted rates to get the overall average.

3. Importance of WAIR Calculation

Details: WAIR is crucial for financial analysis, loan portfolio management, investment evaluation, and comparing different financial products with varying balances and rates.

4. Using the Calculator

Tips: Enter balances in dollars separated by commas, and corresponding interest rates in percentage separated by commas. Ensure both lists have the same number of values.

5. Frequently Asked Questions (FAQ)

Q1: Why use weighted average instead of simple average?
A: Weighted average accounts for the size of each balance, providing a more accurate representation of the overall interest impact.

Q2: Can I use this for both loans and investments?
A: Yes, WAIR works for calculating average interest expense on debts or average returns on investments.

Q3: What if I have balances with zero interest?
A: Include them in the calculation - they will contribute to the total balance but not to the weighted sum.

Q4: How should I format the input?
A: Use comma-separated values without currency symbols. For example: "1000, 2000, 3000" and "5, 3.5, 4.2"

Q5: Can I calculate WAIR for monthly or daily rates?
A: Yes, but ensure all rates are in the same time period (annual, monthly, or daily) for accurate comparison.