smuggycfa

Vaguely intuitively, I think it is essentially "weighting" the interest rate.

To calculate it, assume:

$1 as PV
Payment Number (year x 12) as N
Mortgage rate divided by 12 as I/Y
0 as FV
and CPT for PMT

Now this PMT is monthly, so you multiply by 12 to get you the annual. This number is then the weighted rate you would use to calculate band of investment rate.