RATE
Returns the interest rate per period of an annuity. RATE is calculated by iteration and can have zero or more solutions. If the successive results of RATE do not converge to within 0.0000001 after 20 iterations, RATE returns the #NUM! error value.
Syntax
RATE(nper,pmt,pv,fv,type,guess)
For a complete description of the arguments nper, pmt, pv, fv, and type, see PV.
Nper is the total number of payment periods in an annuity.
Pmt is the payment made each period and cannot change over the life of the annuity. Typically, pmt includes principal and interest but no other fees or taxes.
Pv is the present value — the total amount that a series of future payments is worth now.
Fv is the future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (the future value of a loan, for example, is 0).
Type is the number 0 or 1 and indicates when payments are due.
Set type equal to |
If payments are due |
0 or omitted |
At the end of the period |
1 |
At the beginning of the period |
Guess is your guess for what the rate will be.
- If you omit guess, it is assumed to be 10 percent.
- If RATE does not converge, try different values for guess. RATE usually converges if guess is between 0 and 1.
Remarks
Make sure that you are consistent about the units you use for specifying guess and nper. If you make monthly payments on a four-year loan at 12 percent annual interest, use 12%/12 for guess and 4*12 for nper. If you make annual payments on the same loan, use 12% for guess and 4 for nper.
Example
To calculate the rate of a four-year $8,000 loan with monthly payments of $200:
RATE(48, -200, 8000)
equals 0.77 percent
This is the monthly rate, because the period is monthly. The annual rate is 0.77%*12, which equals 9.24 percent.