Compound interest can be easily calculated using the initial amount, interest rate, and the compounding period. Suppose, you have the initial amount, compounding years, and the final amount. Now how can you calculate the compound interest rate? This is where you need to reverse back the whole procedure. With that said, in this article, you will learn to create and use a reverse compound interest calculator in Excel with easy steps.

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## Download Practice Workbook

You can download the Excel file from the following link and practice along with it.

## What is Compound Interest?

**Compound Interest** is a type of interest that is calculated from the initial amount of money and the collective interest from the past compounding periods.

The compound interest is often treated as interest on interest. This compound interest thrives faster than simple interest. Because the simple interest is calculated only from the initial amount of money.

## Compound Interest Rate Formula

The generic formula for calculating the compound interest is,

`Compound Interest = Final Amount - Initial Amount`

If,

**P = Initial Amount (Principal)**

**i = Annual Interest Rate in Percentage**

**n = Period in Years**

Then the **compound interest formula** becomes,

`Compound Interest = P [(1 + i) ^ n â€“ 1]`

## Reverse Compound Interest Rate Formula

When you have,

**IA = Initial Amount**

**FA = Final Amount**

**n = Period in Years**

Then you can use the following formula to calculate the compound interest rate in reverse,

`Compound Interest Rate = [(FA/IA) ^ 1/n] -1`

## Create a Reverse Compound Interest Rate Calculator

### 1. Use the POWER Function to Create a Reverse Compound Interest Rate Calculator

Now we know the formula to calculate the compound interest rate in reverse is,

`Compound Interest Rate = [(FA/IA) ^ 1/n] -1`

Where,

**IA = Initial Amount**

**FA = Final Amount**

**n = Period in Years**

To create a calculator that calculates the compound interest rate in reverse using the **POWER function**,

âť¶ Allocate cells to input the **Initial Amount, Final Amount, Period in Years**, etc.

I have chosen cells **D4**, **D5**, and **D6** respectively.

âť· Now select a cell where you want to return the compound interest rate value and insert the following formula:

`=(POWER((D5/D4),1/D6))-1`

âť¸ After that press the **ENTER** button.

Thatâ€™s it.

**Read More: How to Create Quarterly Compound Interest Calculator in Excel**

**Similar Readings**

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### 2. Use the RATE Function to Create a Reverse Compound Interest Rate Calculator

To create a calculator to get the compound interest rate in reverse using the **RATE function**, go through the following steps:

âť¶ Choose cells to insert the value of **Initial Amount, Final Amount, and Period in Years.**

For this instance, I have picked cells **D4**, **D5**, and **D6**.

âť· Then insert the following formula in cell **D8**,

`=RATE(D6,0,-D4,D5)`

In the formula above,

**D4** contains the **Initial Amount.**

**D5** contains the **Final Amount.**

**D6** contains the **Period in Years.**

âť¸ Finally press the **ENTER** button to insert the above formula.

**Read More: A Daily Compound Interest Calculator in Excel (Template Attached)**

## Application of the Reverse Compound Interest Rate Calculator

Suppose, youâ€™ve taken a loan of **$5,000,000** from XYZ bank. After **5** years, you need to pay **$8,550,000** in return. From this information, if you want to calculate the compound interest rate in reserve, then follow the steps below:

In the problem above,

**Initial Amount = $5,000,000**

**Final Amount = $8,550,000**

**The period in Years = 5**

âť¶ Now insert the **Initial Amount**, **$5,000,000** in cell **D4**.

âť· Then in cell **D5** enter the **Final Amount** which is **$8,550,000.**

âť¸ Finally, insert the **Period in Years** in cell **D6** which is 5.

After entering the above data, you will see the compound interest rate calculator has instantly calculated the compound interest rate in reverse. In the **D8**, you will see that the calculated compound interest rate is **11%.**

**Read More:** **Compound Interest Formula in Excel: Calculator with All Criteria**

## Conclusion

To sum up, we have discussed the procedure to create and use a reverse compound interest calculator in Excel. You are recommended to download the practice workbook attached along with this article and practice all the methods with that. And donâ€™t hesitate to ask any questions in the comment section below. We will try to respond to all the relevant queries asap. And please visit our website **Exceldemy** to explore more.

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**Methods to Apply Continuous Compound Interest Formula in Excel****Formula for Monthly Compound Interest in Excel (With 3 Examples)****Compound interest excel formula with regular deposits****CAGR Formula in Excel: With Calculator and 7 Examples****How to calculate compound interest for recurring deposit in Excel!**