OpenWindows User's Guide

Rate: Periodic Interest Rate

Use Rate to compute the periodic interest rate. It returns the periodic interest necessary for a present value to grow to a future value over the specified number of compounding periods in the term. Store the following information in the memory registers:

Rate Example:

You have invested $20,000 in a bond. The bond matures in five years and has a maturity value of $30,000. Interest is compounded monthly. You want to determine the periodic interest rate for this investment.

Note -

Before entering the information into the memory registers, choose 5 radix places from the Acc (accuracy) key pop-up menu to produce more accurate results.

Memory register usage:

Register 0: 30000 (future value) Register 1: 20000 (present value) Register 2: 60 (term - 5 x 12)

Clicking SELECT on Rate returns.00678, which tells you that the periodic (monthly) interest rate is 0.678%, under 1% per month. To determine the annual rate, multiply the above formula by 12, which yields a result of 8.14%.