| Weighted Average Interest Rate is a point in time average of all the different buckets of
money - weighted according to the balance in each bucket. Interest being paid on the policy is
based on the amount and timing of the premium payments. For example, a policy could have a
premium paid each month. Since these premiums were applied to different 'buckets',
these different premium payments could be earning different interest rates. So, after a period
of time, a policy can have many buckets of money earning different interest rates. To
determine the weighted average interest rate you take the balance of each bucket and multiply
it times it's interest rate. Total those amounts and divide it by the total money in all
of the cells. |