How to calculate annuity for interest rate in excel

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An annuity is a series of equal cash flows, spaced equally in time.  To solve for an annuity interest rate, you can use the RATE function.

Case study:  The goal in this example is to have $100,000 at the end of 10 years, with an annual payment of $7,500 made at the end of each year. What interest rate is required?

Worked Example:   Calculate interest rate for loan in Excel

Formula

=RATE(nper,pmt,pv,fv)

Explanation

In the example shown C9 contains this formula:

=RATE(C7,-C6,C4,C5)

Explanation

To solve for the interest rate, the RATE function is configured like this:

Worked Example:   RATE function: Description, Usage, Syntax, Examples and Explanation

nper – from cell C7, 10.
pmt – from cell C6, 7500 (negative sign)
pv – from cell C4, 0.
fv – from cell C5, 100000

Worked Example:   PMT, RATE, NPER, PV and FV Financial Functions in Excel

With this information, the RATE function returns 0.0624. Note payment is negative because it represents a cash outflow.

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