RATE() calculates the interest rate per period implied by an annuity.
Use RATE() 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. For more information, see Financial Functions.
RATE(periods,payment,amount)
| • | periods is the total number of periods. |
| • | payment is the payment made each period. |
| • | amount is the amount on which payments are based. |
RATE() assumes that payments are made at the end of the period.
The result is returned to eight decimal places, that is, 0.12345678 or 12.345678%.
If you enter an obviously invalid parameter such as a negative interest rate, Analyzer returns an error.
To calculate the rate implied in a four-year, $8000 loan with monthly payments of $200, specify:
RATE(48,200,8000) = .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% (using the EFFECTIVE() function).