RRI function
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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.
See Also