Annual interest rate

[jw]

Excel 2003.

This is fairly basic.

Say you borrow X amount of dollars with an obligation to pay back Y
amount of dollars (Y > X; lump sum) 6 months from the date of the loan.


Which Excel function is appropriate to determine the interest rate on
an annualized basis?

Thanks very much.

 

[JE McGimpsey]

One way:

=(Y/X)^n - 1

where n is the number of periods per year (in this case, 2)

 

[Guest]

=(Y/X)^2-1 to get the effective annual interest rate (what you are actually
paying yearly taking into account compounding of interest)

=(Y/X-1)*2 to get the APR