What is RATE?

The RATE function calculates the interest rate per period for a loan or investment.

Syntax

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

Example Data

Item

Value

Loan Amount

500,000

Monthly Payment

10,624.65

Number of Payments

60

Formula

=RATE(60,-10624.65,500000)

This returns the monthly interest rate.

To approximate the nominal annual rate:

=RATE(60,-10624.65,500000)*12

Important

RATE returns the rate per payment period.

Therefore, if payments are monthly, the result is a monthly rate.

Practical Use

RATE can answer:

“What interest rate is implied by this loan amount, payment, and repayment period?”

Practice

Create a calculator where the user enters:

  • Loan Amount
  • Monthly Payment
  • Number of Payments

and Excel calculates the interest rate.

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