Lesson 1 of 25 · 6 min
Why a blended advance rate is a weighted average, not a typical rate
Fifty-four percent is nobody's row. It is five rows arguing inside one division.
A blended advance rate looks like a rate someone chose. It is not. It is total lending value divided by total market value, and that quotient is a weighted average. Track 1 lesson 3 introduced the per-name product; this track starts from the average those products leave behind.
On the fictional Halden & Wren March statement the five products sum to $3,277,251.25 of lending value against $6,032,795 of market value. Divide and you get 3,277,251.25 ÷ 6,032,795 = 0.543239, which prints as 54.32 percent. Nobody assigned 54.32 percent to an asset class. The figure fell out of five lookups.
The unweighted mean of the five printed rates is (50 + 35 + 70 + 55 + 85) ÷ 5 = 59 percent. The median is 55. Both sit above the blend, because Calder Growth common is large and cheap to lend against: $1,840,005 at 35 percent. A typical-rate reading of the schedule — mid-fifties, something like equity — erases that weight. The blend is lower than the typical row precisely because the low row is not small.
Weights are market-value shares, not head-counts. Meridian Industrial common is 1,838,300 ÷ 6,032,795 = 30.47 percent of the pool. Calder is 1,840,005 ÷ 6,032,795 = 30.50 percent. Together they are 60.97 percent of the denominator and they carry 50 and 35. The government fund is 15.77 percent of the denominator and carries 85. The average has to live between those facts. It cannot be 'what equity usually gets'.
A blended rate is an output of mix. Change the mix and the number moves, even when every row of the schedule stays put.
Key terms
- Blended advance rate
- Total lending value divided by total market value. A weighted average, not a rate assigned to the account.
- Weighted average
- An average in which each input is scaled by its share of the total. Here the weights are market-value shares.
- Unweighted mean
- The ordinary average of the printed rates, treating each row as one observation. It ignores size.
Worked example
Three ways to average the same five rates
Halden & Wren, March 2026. Five advance rates: 50, 35, 70, 55 and 85 percent. Lending value $3,277,251.25. Market value $6,032,795.
- Unweighted mean
- 59.00%
- Median of the five rates
- 55%
- Sum of lending values
- $3,277,251.25
- Blended advance rate
- 54.32%
- Gap, blend versus unweighted mean
- 4.68 points
(50 + 35 + 70 + 55 + 85) ÷ 5.
3,277,251.25 ÷ 6,032,795 = 0.543239.
The low, large row did this.
The statement's 54.32 percent is the only average that uses the dollars. The other two averages describe the schedule, not the account.
Check yourself
The five Halden & Wren rates average 59 percent if you ignore size, and blend to 54.32 percent once size is restored. What single fact about the book pulls the blend below the unweighted mean?
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.