1. What is Weighted Average?

A weighted average is an average where each value has a specific weight or importance assigned to it. In financial contexts, it's often used when different amounts of money have different percentage weights in a calculation.

2. How Does the Calculator Work?

The calculator uses the weighted average formula:

Where:

• \( WA \) — Weighted average
• \( p_i \) — Percentage weight for each amount
• \( a_i \) — Amount in currency for each item

Explanation: Each amount is multiplied by its corresponding percentage weight, these products are summed, and then divided by 100 to get the weighted average.

3. Importance of Weighted Average

Details: Weighted averages are crucial in finance for calculating portfolio returns, cost basis of investments, and when different amounts contribute unequally to a total.

4. Using the Calculator

Tips: Enter percentage weights and corresponding amounts. You can enter up to 3 pairs. For most accurate results, ensure the total percentage equals 100%.

5. Frequently Asked Questions (FAQ)

Q1: Why use weighted average instead of regular average?
A: When different amounts have different importance or weight, a weighted average provides a more accurate representation than a simple average.

Q2: What if my percentages don't add up to 100%?
A: The calculator will still work, but results may not be meaningful for some applications where exact weighting is important.

Q3: Can I use this for non-financial calculations?
A: Yes, the weighted average concept applies to any situation where values have different weights or importance.

Q4: How many items can I include in the calculation?
A: This calculator handles up to 3 items, but the formula can be extended to any number of items.

Q5: What's the difference between weighted average and median?
A: Weighted average accounts for the importance of each value, while median is simply the middle value in a sorted list, unaffected by weights.