How to Calculate an Interest Rate Using Excel

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Microsoft Excel is a good program to use when making financial decisions. Among the many functions it can perform, Excel can help you calculate the interest rate of a loan or an investment. By simply entering the information you already know, you can use Excel to decide whether or not you want to proceed with the transaction based on the interest you would be paying or earning.

Instructions

Do your homework. To find the interest rate, you will need to know the time period or length of the loan or investment, the monthly payments and the principle of the loan or investment.

Create an Excel spreadsheet to determine your interest rate. Enter a list of headings-Current Value, Future Value, Monthly Payment and Number of Payments. If you begin in cell A1 with the

heading "Current Value," the remaining headings listed here will fall in cells A2, A3 and A4.

Enter the information required in the cells to the right of the headings. If you began in cell A1 as suggested above, you will enter your financial information in cells B1 through B4.

Key in the following formula in the cell under your financial data to determine the interest rate of the investment or loan [=Rate (B4,B3,B1)]. Then click the Enter button on the formula bar.

Make your decision. When complete, the formula will tell you the interest rate you will be paying on your loan or earning on your investment. If the terms of the investment change during your negotiations, simply re-enter the new information to see if the interest rate is good for you.

Source: ehow.com

Category: Forex

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