1. What is the Interest Rate Ratio?

The Interest Rate Ratio compares two different interest rates to show their relative value. It helps determine how much better (or worse) one rate is compared to another, expressed as a decimal value.

2. How Does the Calculator Work?

The calculator uses the simple ratio formula:

Where:

• \( Rate1 \) — First interest rate (percentage)
• \( Rate2 \) — Second interest rate (percentage)

Explanation: A ratio greater than 1 indicates Rate1 is higher, while a ratio less than 1 means Rate2 is higher. The ratio shows how many times larger (or smaller) Rate1 is compared to Rate2.

3. Importance of Rate Comparison

Details: Comparing interest rates is crucial for financial decisions like choosing loans, savings accounts, or investments. The ratio provides a quick way to quantify the difference between two rates.

4. Using the Calculator

Tips: Enter both interest rates as percentages. Rate2 must be greater than 0. The calculator will show the ratio of Rate1 to Rate2.

5. Frequently Asked Questions (FAQ)

Q1: What does a ratio of 1.5 mean?
A: A ratio of 1.5 means the first interest rate is 1.5 times (or 50%) higher than the second rate.

Q2: How is this different from percentage difference?
A: The ratio shows the multiplicative difference, while percentage difference shows the additive difference between rates.

Q3: When is rate comparison most useful?
A: Most useful when comparing loan offers, investment returns, or when deciding between fixed vs variable rate products.

Q4: Should I always choose the higher rate for investments?
A: Not necessarily - also consider risk, terms, and other factors. Higher rates often come with higher risk.

Q5: How precise should my input rates be?
A: For accurate comparison, use rates with at least 2 decimal places, especially when rates are close in value.