calculating an interest rate
Posted by Eugene on August 13, 2001 5:58 AM
Is it possible to find an annual interest rate (monthly/continuously compounded) to match a known future value and a given monthly payment? Eor example; I want to make $200/month payments for 20 years and I want to have $150,000 at the end. What interest rate must I find to reach the goal? How is this calculated?
Posted by Eric on August 13, 2001 7:09 AM
using goal seek- only good for 1 record at a time
In A1 type the formula
=value(-FV(b1,240,200))
Format to currency. This gives the future value using 200$/mo for 20 yrs (240 months) and an interest rate to be entered into b1.
then, using "goal seek" (Tools-->Goal Seek) set cell A1 to value 150000.00 by changing cell b1.
Hope that helps
Posted by Aladin Akyurek on August 13, 2001 7:35 AM
Re: using goal seek- only good for 1 record at a time
Eric,
I miss even the very basics regarding loans, payments, interest, I was wondering if the RATE function would be appropriate to use here. Any comments?
Aladin
Posted by Eric on August 13, 2001 8:19 AM
Re: using goal seek- only good for 1 record at a time
My wife would be the first to tell you that I am no economist! I think rate would work too, but rate is also useful for "jumping" into the middle of a payment scheme (i.e., "I have come this far and paid this much, how much do I have left?"), while future value is probably more appropriate for "shopping around" prior to beginning investing.
Kind of like match and vlookup, you can use vlookup to do the same thing as match, but vlookup does more.
