RATE( ) function

Returns the interest rate per period.

Syntax

RATE(periods, payment, amount)

Parameters

periods

Numeric. The total number of periods.

payment

Numeric. The payment made each period.

amount

Numeric. The amount on which payments are based.

Output

Numeric.

Remarks

This function calculates the interest rate per period implied by an annuity. It assumes that payments are made at the end of the period.

You can use this function to determine the rate of interest being paid on an annuity. For example, if you have the option of leasing or buying, you can use this function to determine the interest rate implied in the lease.

The result is returned to eight decimal places, that is, 0.12345678 or 12.345678%.

Example

To calculate the rate implied in a four-year, $8000 loan with monthly payments of $200, specify:

RATE(48, 200, 8000)

returns 0.00770147.This is the monthly rate because the period is monthly. The annual rate is 0.0077*12, which equals 9.24% compounded monthly, or an effective annual rate of 9.64%, which can be calculated using the EFFECTIVE( ) function.

Related reference
EFFECTIVE( ) function


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