# interest rates

• Aug 17th 2006, 10:45 AM
mathdude
interest rates
Hey, how do I work out the compound interest rate when I know the money invested each year and I know the final amount at the end

Here are the details
£2,000 invested every year
24 years
£205,000 in account after 24 years
What is the interest rate?

Also if someone could help me out with how to put the appropriate formula into Excel that would be amazing.

Thanks guys! :)
• Aug 17th 2006, 10:53 AM
mathdude
It must involve a reworking of this formula

205,000=(2,000(1+r)((1+r)^24-1))/r

Anyone help me out? Also if you could help me do this through excel it would be great.

Thanks guys
• Aug 17th 2006, 11:00 AM
galactus
I have to take off, but you could possibly use a recurrence relation.
• Aug 17th 2006, 01:16 PM
topsquark
Uh oh. Double posting... Danger Will Robinson! Danger!

-Dan
• Aug 17th 2006, 04:30 PM
galactus
Hello Mathdude.

I ran this through Excel. I got 21.2775% as an interest

rate. I don't know if that's what you need or not. I didn't use anything fancy.

I entered 2000 in cell A1 and some interest rate in cell B1.

Then in cell A2 enter =A1+\$B\$1*A1 and drag it down to cell A25.

If you enter .212775 into cell B1 you'll get 205000.80 pounds.

Maye you can use Excel and play with it yourself.
• Aug 17th 2006, 09:08 PM
CaptainBlack
Quote:

Originally Posted by galactus
Hello Mathdude.

I ran this through Excel. I got 21.2775% as an interest

rate. I don't know if that's what you need or not. I didn't use anything fancy.

I entered 2000 in cell A1 and some interest rate in cell B1.

Then in cell A2 enter =A1+\$B\$1*A1 and drag it down to cell A25.

If you enter .212775 into cell B1 you'll get 205000.80 pounds.

Maye you can use Excel and play with it yourself.

Sounds like a problem for the Excel Solver, or Goal Seek tools.

RonL
• Aug 17th 2006, 10:12 PM
JakeD
Quote:

Originally Posted by CaptainBlack
Sounds like a problem for the Excel Solver, or Goal Seek tools.

RonL

CaptainBlack, I posted this in the other thread before you closed it.

Here are two ways to put this in Excel.

First way: use the IRR function for internal rate of return. Copy 2000 into 24 cells. Enter -205000 into the 25th cell. In the 26th cell use the IRR function with the 25 cells as the input array. Use initial guess .1. The answer is .1024 = 10.24%.

Second way: put .1 in a cell, call it r. Put the formula

205000 - (2000*(1+r)*(power(1+r;24)-1))/r

into another cell where r is a reference to the first cell. Use the Goal Seek tool to find the value of r that sets the formula cell to target value 0. Same result.
• Aug 17th 2006, 10:18 PM
CaptainBlack
Quote:

Originally Posted by JakeD
CaptainBlack, I posted this in the other thread before you closed it.
.

Sorry about that :( , but it illustrates the point yet again about multiple posts
just causing confusion. I posted my comment in response to galactus's post
about using Excel, and had completely forgotten what you have said in the

RonL
• Aug 18th 2006, 04:30 AM
galactus
Quote:

Originally Posted by JakeD
CaptainBlack, I posted this in the other thread before you closed it.

Here are two ways to put this in Excel.

First way: use the IRR function for internal rate of return. Copy 2000 into 24 cells. Enter -205000 into the 25th cell. In the 26th cell use the IRR function with the 25 cells as the input array. Use initial guess .1. The answer is .1024 = 10.24%.

Second way: put .1 in a cell, call it r. Put the formula

205000 - (2000*(1+r)*(power(1+r;24)-1))/r

into another cell where r is a reference to the first cell. Use the Goal Seek tool to find the value of r that sets the formula cell to target value 0. Same result.

I thought my answer was a little steep. That's a nice savings account to have, even at your 10% :) . I am unfamiliar with IRR. How do you access it in Excel?.

Edit: nevermind, I found it under financial.