Answer to Question #230851 in Financial Math for Nikka

Question

Dong Yuan financed a 25000 necklace for his wife, Mei Lien. If he will be making 36 monthly payments of 824.40, what rate of financing did he receive?

Answer 1

The financing rate on a loan or borrowing is the rate at which the borrower has to pay the interest to the lender for the borrowed money. The financing rate is the finance charge that is charged by the lender to the borrower for using the funds of the lender. 

The financing rate can be easily estimated with the help of the RATE function in excel. The Rate function returns the rate of financing on a loan or borrowing with the help of the time period, present value, and the payments made by the borrower. 

The rate is estimated as follows:

=RATE(Nper,PMT,PV,−FV)

Therefore, the financing rate is 1.00%