RATE function

[Bert]

When I enter the following, I get a 1% result - should'nt
it be 10%? What am I entering incorrectly? or not
understanding?

RATE FUNCTION
=RATE(36,-195,6000

NPER =36
PMT = 195
PV = 6000

Thanks

 

[Niek Otten]

Did you mean 36 months? Then the monthly rate turns out to be 0.87%. Make
sure your definitions of rates and periodics are consistent.

--

Kind Regards,

Niek Otten

Microsoft MVP - Excel

But maybe you meant 36 years. Then the

 

[hgrove]

Bert wrote...

When I enter the following, I get a 1% result - should'nt it be
10%? What am I entering incorrectly? or not understanding?

[added missing right parenthesis]

=RATE(36,-195,6000)

...

Did you read online help for the RATE function, from which th
following appears.

"Example

To calculate the rate of a four-year $8,000 loan with monthly payment
of $200:

RATE(48, -200, 8000) equals 0.77 percent

This is the monthly rate, because the period is monthly. The annua
rate is 0.77%*12, which equals 9.24 percent.

 

[Ron Rosenfeld]

When I enter the following, I get a 1% result - should'nt
it be 10%? What am I entering incorrectly? or not
understanding?

RATE FUNCTION
=RATE(36,-195,6000

NPER =36
PMT = 195
PV = 6000

Thanks

Not understanding.

The RATE function returns the interest rate PER PERIOD. If what you enter
represents, for example, a three year loan with monthly payments, then to
obtain the annual rate, you need to multiply your result by 12 (the number of
periods in a year).


--ron

 

[Domenic]

Hi Bert,

The formula you're using is fine (except that it should have a bracket
at the end -- I assume that's a typo).

First, the result represents the monthly rate of interest, so you'll
have to multiply your result by 12 to get the annual rate of interest.

Secondly, if you format the cell to a number of decimal places, you'll
find that the actual number is less than 1%.

Rounded to six decimal places the result is 0.874568%. Multiply that by
twelve and your annual interest rate is 0.104948178 or 10.4948178%.

Hope this helps!