XL: RATE Differs from HP Calculator for Periods Other than Annual
ID: Q76849
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The information in this article applies to:
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Microsoft Excel for Windows, versions 2.x, 3.0, 4.0, 5.0
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Microsoft Excel for the Macintosh, versions 2.x, 3.0, 4.0, 5.0
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Microsoft Excel for Windows 95, version 7.0
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Microsoft Excel 97 for Windows
SUMMARY
The value returned for the RATE function in Microsoft Excel will differ
from that returned by a Hewlett-Packard (HP) calculator if the period is
not annual.
MORE INFORMATION
The reason for this is that Microsoft Excel returns a rate of return for
the designated period, but the HP calculator returns an annual rate.
Therefore, if the period designated in Microsoft Excel is not annual, the
returned values will differ, as the following example of an investment
with quarterly payments illustrates.
Example
- Enter the following in a worksheet:
A1: ($1,000.00) B1: =RATE(4,A2,A1)
A2: $315.38
A3: $315.38
A4: $315.38
A5: $315.38
This example describes a loan amount of $1000.00 with quarterly
payments of $315.38. The resulting value in cell B1 is 10%.
- Calculate the RATE with an HP business calculator. Enter
N=4; PV=-1,000; PMT=315.38; FV=0: P/YR=4; End Mode. The RATE
function will return 40%.
Both Microsoft Excel and the HP calculator are correct. The difference is
that Microsoft Excel returns the quarterly rate of return while the HP
calculator returns the annual rate of return.
To have Microsoft Excel return an annual rate, modify the formula as shown
below:
A1: ($1,000.00) B1: =RATE(4,A2,A1)*(# payments per year)
A2: $315.38
A3: $315.38
A4: $315.38
A5: $315.38
Additional query words:
xl2k interest rate
Keywords :
Version : WINDOWS:2.x,3.x,4.0,5.0,7.0,97; MACINTOSH:2.x,3.0,4.0,5.0
Platform :
Issue type :
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