In this lesson you will learn how to use RATE function in Excel.
Using RATE function you can calculate interest rates of investments or loans
- nper - how many installments would you pay
- pmt - how much you pay every month
- pv - present value
- fv - future value
Example 1 Interest rate of loan
The company offers installment sale. Installments are spread over 50 installments, the monthly repayment amount is $15000. Price is $1000000. What interest rate offers seller, per month and per year?
As you see you should type PMT with minus sign. You pay money off so it cause that you spend that money.
Answer: The result is the monthly interest rate: 1.07%. Yearly interest rate is 12*1.07% = 12.90%.
Example 2 Interest rate for weekly installments
What is interest rate for $10 000 loan. Weekly $600 payments are made for 7 years. You have to pay at the beginning of week.
Answer: The result is the weekly interest rate: 6.38%