What are the best tips for calculating the weighted average?
Calculation of weighted average requires taking into account the impact that has an average number per average. This is an important concept that is used in various financial scenarios, such as portfolio management or measuring the value of corporate shares. An important thing to remember when calculating the weighted diameter is that each number included on average is weighted according to the part of the whole it communicates. The check that this calculation is correct includes a complete increase in all participating numbers and after the weighted diameters correctly reflect the impact on the units. It is possible to use the arithmetic average if all the diameters are the same percentage of the whole. For example, a man who will make two investments of $ 500 USD (USD) and sees further increases by four percent and another increase of two percent can easily say that his total investment has risen by three percent, or four plus two divided by two.
When it is necessary inYet the weighted diameter is when the parts are different by different values. Again, using the Portfolio Example Value, imagine that one has two investments during the year. It invests $ 200 in one share, which is rising by ten percent and invests $ 800 in another stock that rises by 2.5 percent.
Simply taking the arithmetic average of these two increments in a percentage would assume that the portfolio increased by 6.25 percent, which is ten 2.5 percent divided by two. This is inaccurate because an investment of $ 800 has a much larger portfolio than an investment of $ 200. Calculation of weighted diameter requires first to determine how many parts each Number includes. The total portfolio is $ 1,000, or $ 800 added to $ 200. Once it is determined, it follows that $ 800 is 80 percent or 0.8 of the total and $ 200 is 20 percent, ie 0.2.
with these percentage on site may be completed by a weighted diameter calculation by multiplying the corresponding portfolio growth and sweatby adding these sums together. Thus, 0.8 is multiplied by 2.5, which provides a two and 0.2 response multiplied by ten, which also provides two. Adding these sums together shows that the portfolio has increased by four percent. This can be checked by returning to the original amounts, which shows that the $ 1,000 portfolio has received a profit of $ 40, which is four percent.