An annuity is a series of equal cash flows, spaced equally in time. The goal in this example is to have $100,000 at the end of 10 years, with an annual payment of $7,500 made at the end of each year. What interest rate is required?
To solve for the interest rate, the RATE function is configured like this in cell C9:
nper - from cell C7, 10.
pmt - from cell -C6, -7500
pv - from cell C4, 0.
fv - from cell C5, 100000
With this information, the RATE function returns 0.0624. When a percentage number format is applied, the result displays as 6.24%. Note payment is negative because it represents a cash outflow.