We’ll use **the RATE function**:

`=`

`RATE(nper, pmt, pv,[fv], [type], [guess])`

**Nper**(required): total payment periods number (years, months)

**Pmt** (required): the pre-set payment amounts for each period. It doesn’t vary over the annuity’s lifetime. It generally involves principal and interest but excludes taxes.

**Pv** (required): the present worth of the loan

**Fv** (optional): the future worth, or the cash balance you want after the last installment. It defaults to 0 if not specified.

**Guess** (optional): your best guess as to what the rate may be, if you leave it blank it defaults to 10%.

The generic formula with **the RATE function** is.

`=RATE( periods, -payment, amount)*12`

We’ll try to find out the Interest Rate in cell **C9**.

**Payment Periods in Month (nper**) is **12** months which is in the **C5** cell.

**Loan Amount (pv)** is **15,000** USD which is in the **C6** cell.

**EMI** is **1,318 **USD which is in the** C7** cell. We will use the value of** EMI** to find the interest rate. Values of **Payment Periods in Month** and** Loan Amoun**t will also be used.

- Use the formula in the
**C9**cell like this.

`=RATE(C5,C7,C6)*C5`

**Formula Explanation**

**RATE(C5,C7,C6) →**returns the periodic interest rate.**Output**→**833%**

**RATE(C5, C7, C6)*12 →**returns the actual interest rate found from EMI**Output →10%**

Press **Enter** to find the** Interest Rate** as **10%**.

## Calculation of EMI from Interest Rate

We can use **the ****PMT function** when we need to calculate EMI from the interest rate. We want to calculate EMI in cell **C9**. We have taken the **Interest Rate** as **10%** which is in the **C7** cell. Similarly, as before, the** Payment Periods in Month** is **12**, and **Loan Amount** is **15,000 USD**.

- Use the following formula in the
**C9**cell to calculate**EMI**from the interest rate.

`=PMT(C7/12,C5,-C6)`

- Press
**Enter**to get the output as**1318.74****USD**.

**Read More: **How to Calculate APR in Excel

## Things to Remember

- The
**EMI**has to be taken negatively. In annuity functions cash paid out is represented as a negative number.

## Practice Section

We have provided a** Practice** section like below in each sheet on the right side.

**Download the Practice Workbook**

## Related Articles

- How to Convert Monthly Interest Rate to Annual in Excel
- How to Calculate Monthly Interest Rate in Excel
- How to Create Effective Interest Method of Amortization in Excel

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