Microsoft Office Tutorials and References
In Depth Information
Using RATE to Determine an Interest Rate
type
type This is the number 0 or 1 and indicates when payments are due.
The default value of 0 assumes that the first payment is due after a
month has elapsed. If you have to make the first payment on the day
the loan is issued, you should set this value to 1.
Note
The payment returned by PMT includes principal and interest but not
taxes, insurance, escrow, or fees sometimes associated with loans.
For a reality check, try multiplying the calculated payment by nper. This
way, you can calculate the total of all payments over the life of the loan.
In Figure 13.2 , you see that a $29,000 car actually costs $32,044.75 in prin-
cipal and interest.
Figure 13.2.
Figure 13.2. PMT calculates a monthly loan payment.
PMT calculates a monthly loan payment.
Using
Using RATE
to Determine an Interest Rate
The PMT function is useful when you are considering a new loan. If you are
analyzing a loan that you have been paying for a while, you might know the
monthly payment but forget the interest rate. The RATE function can help you
determine the rate.
RATE to Determine an Interest Rate
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