# What is the meaning of weighted average

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## What is the Meaning of Weighted Average?

A weighted average, also known as a weighted mean, is a type of average that takes into account the relative importance of each value in the set. This type of average is often used in finance and economics when calculating the average cost of an investment or portfolio.

The weighted average is calculated by multiplying each value by a weighting factor and then summing the results. The weighting factor is a number that represents the importance of the value in the set. For example, if the value of one item in the set is twice as important as the value of another item, the weighting factor for the first item would be two.

The weighted average is useful in situations where some values in the set are more important than others. For example, in a portfolio of stocks, the value of certain stocks may be more important than others. By using a weighted average, the portfolio manager can calculate an average cost that takes into account the relative importance of each stock.

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Weighted averages can also be used to calculate averages for groups of data. For example, a company may want to calculate an average salary for a certain group of employees. By using a weighted average, the company can take into account the different salaries of each employee and calculate an average salary for the group.

Weighted averages can also be used to calculate averages for different categories of data. For example, a company may want to calculate an average sales price for a certain product. By using a weighted average, the company can take into account the different sales prices of the product in different regions and calculate an average sales price for the entire product.

Weighted averages are useful in many situations where it is important to take into account the relative importance of different values in a set. By using a weighted average, the user can calculate an average that takes into account the importance of each value in the set.