Rate Function

Rate function is used calculating interest rate per period for a loan.

Syntax for RATE Function is

RATE(Nper;pmt;PV;FV;Type)

PV – Present Value

rate – Interest Rate

Nper – Payment Periods

Pmt – Payment

FV – Future Value

Type – 1 if payment is at the beginning of the period, 0 if payment is at the end of the period

Example1:

Jane wants to take a loan for a total of 50,000$. Her optimal plan for paying it back is 2,250$ monthly payments for 24 months. In order for Jane’s plan to work, what should be the interest rate of the loan?

Our formulation using rate function for this example is :

RATE(24;-2,250$;50,000$;0;0)=0,63%

In order for Jane’s plan to work, monthly interest rate must be 0.63%.