Calculating Interest Rate

In the calculations that have been presented so far in this chapter, the interest rate was a variable that you either know or had to estimate. But what if you know the other parameters of a loan or other transaction but not the interest rate? Then you can calculate it using the RATE function.

Here’s an example. Suppose you want to take out a $10,000 personal loan from a friend or family member. They agree with the condition that you repay the loan at $300 per month for three years. You’d like to determine the effective interest rate for this deal—here’s where the RATE function comes in. Is this a good deal, or would you be better off taking a loan from the bank?

The RATE function has the following syntax:

RATE(nper, pmt, pv, fv, type, guess)

The first three arguments are required:

• nper is the number of payments for the loan.

• pmt is the payment amount.

• pv is the present value—the amount of the loan.

Taken From : Manage Your Money and Investments with Microsoft Excel

Related posts:

1. Calculating Interest Rate (2) The other three arguments are optional: fv is the future...
2. Working with Future Value The concept of future value is quite simple and is...
3. Using the Present Value Function (2) You use the PV function to calculate present value. The...
4. Working With Future Value (2) The other two arguments are optional: pv is the present...
5. The Best Business Loans Business loan is the best alternative to get additional funds!...

Related posts brought to you by Yet Another Related Posts Plugin.