Documentation/How Tos/Calc: RRI function

RRI

Returns an equivalent interest rate when an investment increases in value.

Syntax:

RRI(numperiods; presentvalue; futurevalue)

numperiods: the number of periods in the term.

presentvalue: the value at the start of the term.

futurevalue: the value at the end of the term.

RRI calculates the fixed interest rate needed, so that presentvalue invested for numperiods (and compounded each period) is worth futurevalue at the end of the term. RRI returns a fixed interest rate which applies to each period.

The underlying equation is:

presentvalue * (1 + RRI)^numperiods = futurevalue.

Example:

RRI(8; 1000; 1600)

returns approximately 6.05%. You invest $1,000, and receive $1,600 after 8 years. If you had instead invested that sum in a fixed rate interest account, with annually compounding interest, the account would have needed to pay 6.05% to gain the same value.

Issues:

• numperiods may be entered as a fractional number, but in this case the result may be slightly inaccurate, as the fractional period will calculate as if partially compounded.