Wednesday, February 3, 2010

Calculate the rate of interest

Here is how you can calculate the rate of interest using Excel XP
Insert > Function > Rate
Enter the following
Number of periods
Regular payment
PV (i.e amount of loan)
FV (i.e. accumulated amount)
Type (0 - payment at end of period, 1 - payment at beginning of period
Enter negative amount for PV and FV and positive amount for regular payment
This will give you the interest rate per period. You can convert to an annual rate by multiplying the number of periods in a year.
The function in Excel 2007 is different, but the concept is the same.