Microsoft Office Tutorials and References

In Depth Information

**Figuring Loan Calculations**

The RATE function returns the interest rate
per period.
This number can

be misleading. The periodic interest amount may be small enough that it is

displayed as 0 percent if the formatting in the cell isn’t set to display enough

decimal points.

To find out the annual rate, you simply need to take the number returned by

RATE and multiply it by 12. To do this:

1. Position the cursor in the cell where you want the annual interest rate

to appear.

2. Enter a
=.

3. Click the cell where the RATE function returned the periodic

interest rate.

4. Enter a
×.

5. Enter
12.

6. Press Enter.

As an example, assume a loan principal of $15,000 with a monthly payment

of $650. The loan is to be paid off in 24 months. Figure 5-7 shows a worksheet

with these figures. The periodic interest rate is calculated with the RATE

function, and then the annual rate is calculated by multiplying the periodic

interest rate by 12.

Figure 5-7:

The RATE

function

calculates

the periodic

interest

rate.

You can use three optional arguments with RATE:

✓
Future Value:
The amount you want the loan to be worth at the end of

its life. The default is 0.

✓
Type:
This tells the function whether payments are applied at the end

of the period or the beginning of the period. A value of 0 indicates the