Microsoft Office Tutorials and References

In Depth Information

**Rate**

life). If you expect to earn 5 percent per year on average (the discount rate) and

withdraw $5,000 per month, how long will it take to burn through your savings (in

other words, how long can you afford to live)? The answer, as you can see in Figure

31.5 is 264 months or 22 years.

RATE

In this last example, assume that you invest $30,000 (say, in a piece of equipment),

and that this investment will generate $500 net income per month over the next seven

years. If you purchase this piece of equipment or make any other such investment,

what is your compounded average annual rate of return? The answer, as shown in

Figure 31.6, is 0.84 percent per month or 10.13 percent per year.

As you can see, the family of annuity functions looks and feels the same for all

functions. In the next chapter, you will practice using these and similar functions in

an amortization table.

FIGURE 31.5
The NPER

—

Number of Periods Function

FIGURE 31.6
The Rate Function Menu