RATE function

This article describes the formula syntax and usage of the RATE function (function: A prewritten formula that takes a value or values, performs an operation, and returns a value or values. Use functions to simplify and shorten formulas on a worksheet, especially those that perform lengthy or complex calculations.) in Microsoft Excel.

Description

Returns the interest rate per period of an annuity. RATE is calculated by iteration and can have zero or more solutions. If the successive results of RATE do not converge to within 0.0000001 after 20 iterations, RATE returns the #NUM! error value.

Syntax

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

 Note   For a complete description of the arguments nper, pmt, pv, fv, and type, see PV.

The RATE function syntax has the following arguments (argument: A value that provides information to an action, an event, a method, a property, a function, or a procedure.):

  • Nper    Required. The total number of payment periods in an annuity.
  • Pmt    Required. The payment made each period and cannot change over the life of the annuity. Typically, pmt includes principal and interest but no other fees or taxes. If pmt is omitted, you must include the fv argument.
  • Pv    Required. The present value — the total amount that a series of future payments is worth now.
  • Fv    Optional. The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (the future value of a loan, for example, is 0).
  • Type    Optional. The number 0 or 1 and indicates when payments are due.
Set type equal to If payments are due
0 or omitted At the end of the period
1 At the beginning of the period
  • Guess    Optional. Your guess for what the rate will be.
    • If you omit guess, it is assumed to be 10 percent.
    • If RATE does not converge, try different values for guess. RATE usually converges if guess is between 0 and 1.

Remarks

Make sure that you are consistent about the units you use for specifying guess and nper. If you make monthly payments on a four-year loan at 12 percent annual interest, use 12%/12 for guess and 4*12 for nper. If you make annual payments on the same loan, use 12% for guess and 4 for nper.

Example

The example may be easier to understand if you copy it to a blank worksheet.

ShowHow do I copy an example?

  1. Select the example in this article. If you are copying the example in Excel Online, copy and paste one cell at a time.
    Important: Do not select the row or column headers.

Selecting an example from Help

Selecting an example from Help

  1. Press CTRL+C.
  2. Create a blank workbook or worksheet.
  3. In the worksheet, select cell A1, and press CTRL+V. If you are working in Excel Online, repeat copying and pasting for each cell in the example.
    Important: For the example to work properly, you must paste it into cell A1 of the worksheet.
  4. To switch between viewing the results and viewing the formulas that return the results, press CTRL+` (grave accent), or on the Formulas tab, in the Formula Auditing group, click the Show Formulas button.

After you copy the example to a blank worksheet, you can adapt it to suit your needs.

 
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A B
Data Description
4 Years of the loan
-200 Monthly payment
8000 Amount of the loan
Formula Description (Result)
=RATE(A2*12, A3, A4) Monthly rate of the loan with the above terms (1%)
=RATE(A2*12, A3, A4)*12 Annual rate of the loan with the above terms (0.09241767 or 9.24%)

 Note   The number of years of the loan is multiplied by 12 to get the number of months.

 
 
Applies to:
Excel 2010, Excel Web App, SharePoint Online for enterprises, SharePoint Online for professionals and small businesses