Rate syntax

  • Thread starter Thread starter Guest
  • Start date Start date
G

Guest

Can some one please explain the actual function of the rate syntax
=RATE(nper,pmt,pv,fv,type,guess)

From what i understand this tells me that over a certain amout of years of
paying off the loan amount it gives me a interest rate monthly and yearly.
but it is not to clear, How come the interest rate changes and if i dont put
the minus symbol in the monthly payment cell the outcome is NUM#.
This is really confusing and the help menu doesnt explain this syntax very
well

PLEASE HELP
 
nper is number of payment periods.
pmt should be negative as it is an outgoing amount, also this is an
equal amount you make every period.
pv is the loan amount, should be positive as this is an incoming
amount.
fv is future value, optional as in your case you are dealing with
loans.

What do you mean by interest is changing. Can you post your data., and
where it changes.

Mangesh
 
The function is based on cashflows. A negative number means Cash PAID. A
positive number means Cash RECEIVED. That rule applies to PV, FV, and PMT.
The general assumption is that you pay cash in (-), wait for a period of
time, then get cash back (+).

Keep in mind that it's possible for you to make a bad investment and have a
negative return.

Look at this scenario:
NPMT 1
PV -$1000
FV $800
PMT 0

RATE = -20%

You invest $1000 for 1 year, make and receive no pmts, and get $800
back...You lost money.

Also, remember that the rate returned is the rate per pmt period. So if
your payments are monthly...you get the rate for one month...not for a year.

Does that help?
 
Back
Top