How to Use the RATE Function in Excel

The RATE function is used to calculate the interest rate per period for an annuity based on constant periodic payments and a constant interest rate. This function is available in both Microsoft Excel and Google Sheets and is highly useful for a variety of financial calculations.

Syntax

The syntax for the RATE function is identical in Excel and Google Sheets:

RATE(nper, pmt, pv, [fv], [type], [guess])

nper: The total number of payment periods in the annuity.
pmt: The payment made each period; this amount must remain constant throughout the duration of the annuity.
pv: The present value, or the total amount that a series of future payments is currently worth.
fv (optional): The future value, or the cash balance desired after the final payment has been made. If not specified, it defaults to 0.
type (optional): Specifies whether payments are due at the beginning or the end of the period. A value of 0 (or omitted) indicates the end of the period, and 1 indicates the beginning.
guess (optional): An initial estimate for the interest rate. If left unspecified, it defaults to 10%.

Example: Loan Calculation

Consider a scenario in which you take out a $50,000 loan to be repaid over 5 years with monthly payments of $1,000 and an annual interest rate of 6%. You can calculate the monthly interest rate using the RATE function.

nper	pmt	pv	fv	type	Rate Calculation
60	-1000	50000	0	0	=RATE(A2, B2, C2)*12

In this example, the formula =RATE(60, -1000, 50000)*12 calculates the monthly interest rate, which is then multiplied by 12 to obtain the annual rate.

Example: Investment Calculation

Imagine you invest $10,000 now and plan to receive $2,000 annually at the end of each year for 5 years. To find out the annual interest rate earned, you can utilize RATE:

nper	pmt	pv	fv	type	Rate Calculation
5	2000	-10000	0	0	=RATE(A8, B8, C8)*12

The formula =RATE(5, 2000, -10000)*12 provides the annual interest rate for this investment setup.

By leveraging the RATE function in Excel or Google Sheets, you can efficiently determine the interest rate per period for various financial arrangements, including loans, investments, and annuities.

More information: https://support.microsoft.com/en-us/office/rate-function-9f665657-4a7e-4bb7-a030-83fc59e748ce

Other functions

ACCRINT

Returns the accrued interest for a security that pays periodic interest

ACCRINTM

Returns the accrued interest for a security that pays interest at maturity

AMORDEGRC

Returns the depreciation for each accounting period by using a depreciation coefficient

AMORLINC

Returns the depreciation for each accounting period

COUPDAYBS

Returns the number of days from the beginning of the coupon period to the settlement date

COUPDAYS

Returns the number of days in the coupon period that contains the settlement date

COUPDAYSNC

Returns the number of days from the settlement date to the next coupon date

COUPNCD

Returns the next coupon date after the settlement date

COUPNUM

Returns the number of coupons payable between the settlement date and maturity date

COUPPCD

Returns the previous coupon date before the settlement date

CUMIPMT

Returns the cumulative interest paid between two periods

CUMPRINC

Returns the cumulative principal paid on a loan between two periods

Returns the depreciation of an asset for a specified period by using the fixed-declining balance method

DDB

Returns the depreciation of an asset for a specified period by using the double-declining balance method or some other method that you specify

DISC

Returns the discount rate for a security

DOLLARDE

Converts a dollar price, expressed as a fraction, into a dollar price, expressed as a decimal number

DOLLARFR

Converts a dollar price, expressed as a decimal number, into a dollar price, expressed as a fraction

DURATION

Returns the annual duration of a security with periodic interest payments

EFFECT

Returns the effective annual interest rate

Returns the future value of an investment

FVSCHEDULE

Returns the future value of an initial principal after applying a series of compound interest rates

INTRATE

Returns the interest rate for a fully invested security

IPMT

Returns the interest payment for an investment for a given period

IRR

Returns the internal rate of return for a series of cash flows

ISPMT

Calculates the interest paid during a specific period of an investment

MDURATION

Returns the Macauley modified duration for a security with an assumed par value of $100

MIRR

Returns the internal rate of return where positive and negative cash flows are financed at different rates

NOMINAL

Returns the annual nominal interest rate

NPER

Returns the number of periods for an investment

NPV

Returns the net present value of an investment based on a series of periodic cash flows and a discount rate

ODDFPRICE

Returns the price per $100 face value of a security with an odd first period

ODDFYIELD

Returns the yield of a security with an odd first period

ODDLPRICE

Returns the price per $100 face value of a security with an odd last period

ODDLYIELD

Returns the yield of a security with an odd last period

PDURATION

Returns the number of periods required by an investment to reach a specified value

PMT

Returns the periodic payment for an annuity

PPMT

Returns the payment on the principal for an investment for a given period

PRICE

Returns the price per $100 face value of a security that pays periodic interest

PRICEDISC

Returns the price per $100 face value of a discounted security

PRICEMAT

Returns the price per $100 face value of a security that pays interest at maturity

Returns the present value of an investment

RECEIVED

Returns the amount received at maturity for a fully invested security

RRI

Returns an equivalent interest rate for the growth of an investment

SLN

Returns the straight-line depreciation of an asset for one period

SYD

Returns the sum-of-years' digits depreciation of an asset for a specified period

TBILLEQ

Returns the bond-equivalent yield for a Treasury bill

TBILLPRICE

Returns the price per $100 face value for a Treasury bill

TBILLYIELD

Returns the yield for a Treasury bill

VDB

Returns the depreciation of an asset for a specified or partial period by using a declining balance method

XIRR

Returns the internal rate of return for a schedule of cash flows that is not necessarily periodic

XNPV

Returns the net present value for a schedule of cash flows that is not necessarily periodic

YIELD

Returns the yield on a security that pays periodic interest

YIELDDISC

Returns the annual yield for a discounted security; for example, a Treasury bill

YIELDMAT

Returns the annual yield of a security that pays interest at maturity