3 ms·

> weighted by sales of each, of course So you are averaging amounts of money, so you are averaging things that can be added and you are not averaging interest

> weighted by sales of each, of course So you are averaging amounts of money, so you are averaging things that can be added and you are not averaging interest rates. So you're not doing what you think you were doing and everything is good. (1.2+1.5)/2 doesn't have a meaning but (1.2moneyA+1.5moneyB)/2=moneyAB and growth rate has nothing to do here > because it represents the interest rate that they're earning when they hold that basket of bonds No it doesn't. Look at my example, you would think that the arithmetic average growth rate is 1.35. But now if I told you product A is in fact made up of two subproducts, one is not growing (1) and the others is growing a lot (2), you would compute a new average of (1+2+1.5)/3=1.5

darawk 6y ago
> So you are averaging amounts of money, so you are averaging things that can be added and you are not averaging interest rates. So you're not doing what you think you were doing and everything is good. (1.2+1.5)/2 doesn't have a meaning but (1.2moneyA+1.5moneyB)/2=moneyAB and growth rate has nothing to do here You're taking a weighted average of interest rates. You can call it an amount of money if you like, but you can also call it a weighted average of interest rates. This is no different from a weighted average of time-varying interest rates over irregular intervals of time.