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.