Microsoft Office Tutorials and References
In Depth Information
The Basic Excel Financial Functions
Figure 11-10: Calculating a growth rate.
Interest-free loans
Interest-free loans are rarely free because the interest the merchant would receive for lending
you the money is built into the price.
Assume that you want to purchase a $3,000 leather couch, and you can pay for it in 12 monthly
payments with no interest. A little comparison shopping reveals that you can get the same couch
for $2,500 if you pay cash. So, in essence, you’re paying $500 in interest on a $2,500 loan, or
35.07%.
=RATE(12,–3000/12,2500,0,0,.01)*12
You can check the results of the RATE function by creating an amortization schedule (see Figure
11-11). If the balance goes to zero, the rate is correct.
Figure 11-11: An amortization schedule to verify the results of the RATE function.
 
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