Excel RATE function

Function: RATE

Description: Excel RATE function in Microsoft Excel is used to calculate the interest rate required to pay off a loan or other debt over a specified number of periods, taking into account the loan amount, the periodic payment, and the number of periods over which the debt is to be repaid. The RATE function can be used to compare different loan options or to determine the interest rate required to achieve a specific payment amount.

The syntax for the RATE function is as follows:

Syntax: RATE(nper, pmt, pv, [fv], [type], [guess])

Where:

• nper: The total number of periods over which the debt is to be repaid.
• pmt: The periodic payment made each period. This value can be negative or positive, depending on whether the payment is an inflow or outflow of cash.
• pv: The present value, or the total amount of the loan.
• [fv]: Optional. The future value, or the balance remaining after the final payment is made. If this value is not specified, it is assumed to be 0 (zero).
• [type]: Optional. A logical value that indicates when the payments are due. If this value is omitted or set to 0 (zero), payments are due at the end of the period. If this value is set to 1, payments are due at the beginning of the period.
• [guess]: Optional. An initial guess at the interest rate. If this value is not specified, it is assumed to be 10%.

Examples:

To calculate the annual interest rate required to pay off a loan of $20,000 over 5 years with monthly payments of $400, you can use the following formula:

=RATE(5*12, -400, 20000, 0, 0)