Which Excel function is a financial function that returns the number of periods for loan or investment?
What is the “RATE Function”?The RATE function is a financial function in Excel that calculates the interest rate per period of an annuity. The function is used to calculate the periodic interest rate, which can then be multiplied as required to calculate the annual interest rate. The function calculates by iteration. Show
The function can be used to calculate the interest rate charged by a loan or offered by an investment for a given period. The RATE function’s output can help decide whether to borrow at a particular interest rate or invest in a security, such as bonds, at the rate of return offered. Key Learning Points
SyntaxThe syntax for the RATE function is shown as: Rate(nper, pmt, pv, [fv], [type], [guess] The syntax includes the following arguments:
Optional Arguments
Important Points about the RATE Function
Example 1:Based on the information below, we have been asked to calculate the interest rate for this loan using Excel’s RATE function. The RATE function has calculated the interest rate for this loan as 0.6%. The payment per month is entered as a negative number to reflect a cash outflow. This output is the monthly interest rate as the Nper and payments are monthly. If you want the annual interest rate, you need to multiply this output by 12. Example 2:Calculate the yield to maturity or the return rate offered by the bond below. Coupon payments are made at the end of each year. The bond gives an annualized return of 4.4%. Notice we have also included the optional arguments, including a guess of the interest rate as 4%. The present value is a negative number as investing in the bond today will lead to a cash outflow. Investing in a bond is different from taking a loan, where first there is a cash inflow, followed by outflows towards interest and principal repayment. In a bond, in the beginning, there is a cash outflow (the investment), followed by cash inflows (interest payments and eventually the original investment). Which function is a financial function that returns the number of periods for loan or investment?Financial functions (reference). Which Excel function is used to calculate loan duration?PMT, one of the financial functions, calculates the payment for a loan based on constant payments and a constant interest rate. Use the Excel Formula Coach to figure out a monthly loan payment. At the same time, you'll learn how to use the PMT function in a formula.
What function calculates the total number of periods in a loan?The NPER Function[1] is categorized under Excel Financial functions. The function helps calculate the number of periods that are required to pay off a loan or reach an investment goal through regular periodic payments and at a fixed interest rate.
What is the function that returns the number of payments in a loan?The PMT function is a financial function that returns the periodic payment for a loan. You can use the PMT function to figure out payments for a loan, given the loan amount, number of periods, and interest rate.
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