I've got a problem which I am unfortunately unable to solve.
How can I compare the 3 loans below, to get an Average Weighted interest rate?
Last edited by skipjack; July 25th, 2018 at 12:55 AM.
The sum of the products of the "weights" and "data" divided by the sum of the "weights."
In this case, the data are the interest rates on each loan, and the weights are the amounts of each loan.
That is a sum of products, with the "data" being the rates and the "weights" being the balance due.
So the weighted average tells us what the interest rate would need to be on a loan equal in amount to the total of three actual loans with a single interest payment equal to the total of the three actual payments due.
That's all that can be calculated.
and "nominal rate" (simple interest?).
I suspect that this is background for a multi-question problem that goes on to ask for things like weighted average maturity.
One does wonder why no explanation on how to make such calculations was provided before posing the question.