In this lesson we will be going through the RATE function, which finds the interest rate per period when paying back a loan. This is only possible if you know the payment amount per month, the number of periods, and the initial amount borrowed.
We’ll write Equals, Rate, select the number of periods, the amount paid every month, the Present Value, and the Future Value.
We get a Rate of 0.5% per period, which in our case is per month. If we want to find the annual interest rate from this, we simply have to multiply this number by 12.
This gives us 6%, which coincides with the number we initially gave.
In this lesson we have looked at the RATE function, which gives us the interest rate per period on a loan.