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APR - RATE Function
Hi,
I am trying to use the RATE Function to calculate the Annual Percentage Rate for the following Loan: Loan Amount £300 Payments £15 a week Duration 30 Weeks Charges £150 Total Amount Payable £450 The Formula I am using is not giving me the correct result which should be 330%, can any one see where I am going wrong ? =(RATE(30,-15,300*(50%),0,0)) TIA Jonathan |
#2
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APR - RATE Function
You have two problems. First your parameters to the Rate function are not
correct. Why would you specify PV as 300*(50%)? That equals 150, which is definitely not your PV. Just enter the loan amount of 300. The total amount payable is a red herring, which you don't have to enter. Rate knows the total amount by multiplying the term by the payment. Once corrected, you will find: =rate(30,-15,300) = 2.84% Remember, as in all financial functions, this is the *periodic* interest rate. Because your payment period is weekly, you have to convert this to an annual rate. There are several methods, but I prefer the FV function. You need to ask the question, if I'm being charge 2.84%/week interest, how much will I owe in a year if I make no payments? That will tell you the APR. The formula you need is: =fv(rate(30,-15,300),52,0,-1)-1 =329.98% -- Regards, Fred "Jonathan Rigley" wrote in message ... Hi, I am trying to use the RATE Function to calculate the Annual Percentage Rate for the following Loan: Loan Amount £300 Payments £15 a week Duration 30 Weeks Charges £150 Total Amount Payable £450 The Formula I am using is not giving me the correct result which should be 330%, can any one see where I am going wrong ? =(RATE(30,-15,300*(50%),0,0)) TIA Jonathan |
#3
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APR - RATE Function
Hi Fred,
Thank you, I think I did get it wrapped around me neck a little bit ! Thanks for your time and the explanation. Jonathan "Fred Smith" wrote in message .. . You have two problems. First your parameters to the Rate function are not correct. Why would you specify PV as 300*(50%)? That equals 150, which is definitely not your PV. Just enter the loan amount of 300. The total amount payable is a red herring, which you don't have to enter. Rate knows the total amount by multiplying the term by the payment. Once corrected, you will find: =rate(30,-15,300) = 2.84% Remember, as in all financial functions, this is the *periodic* interest rate. Because your payment period is weekly, you have to convert this to an annual rate. There are several methods, but I prefer the FV function. You need to ask the question, if I'm being charge 2.84%/week interest, how much will I owe in a year if I make no payments? That will tell you the APR. The formula you need is: =fv(rate(30,-15,300),52,0,-1)-1 =329.98% -- Regards, Fred "Jonathan Rigley" wrote in message ... Hi, I am trying to use the RATE Function to calculate the Annual Percentage Rate for the following Loan: Loan Amount £300 Payments £15 a week Duration 30 Weeks Charges £150 Total Amount Payable £450 The Formula I am using is not giving me the correct result which should be 330%, can any one see where I am going wrong ? =(RATE(30,-15,300*(50%),0,0)) TIA Jonathan |
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