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Blended Interest Rate Formula:
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The Blended Interest Rate calculates the overall interest rate when multiple loans or investments with different rates and amounts are combined. It provides a weighted average interest rate based on the proportion of each amount.
The calculator uses the blended interest rate formula:
Where:
Explanation: The formula calculates a weighted average where each interest rate is weighted by its corresponding amount, giving larger amounts more influence on the final result.
Details: Calculating blended interest rates is crucial for financial planning, debt consolidation analysis, investment portfolio management, and comparing different financing options with multiple interest rates.
Tips: Enter interest rates as percentages (e.g., 5.5 for 5.5%) separated by commas. Enter corresponding amounts in the same order, also separated by commas. All rates must be non-negative and all amounts must be positive.
Q1: What types of financial products can use blended interest rates?
A: Blended rates are commonly used for multiple loans, credit cards with different balances and rates, investment portfolios, and debt consolidation scenarios.
Q2: How does the blended rate differ from a simple average?
A: A blended rate is a weighted average that considers the size of each amount, while a simple average treats all rates equally regardless of the amounts involved.
Q3: Can I use this for both loans and investments?
A: Yes, the blended rate calculation works for both debt (interest paid) and investments (interest earned) with multiple rates and amounts.
Q4: What if I have rates in different formats (annual, monthly)?
A: Ensure all rates are converted to the same time period format before calculation, typically annual percentage rates for consistency.
Q5: How accurate is the blended rate for financial decision-making?
A: The blended rate provides an accurate overall rate for comparison purposes, but actual payments or returns may vary based on specific terms and compounding periods.