How To Find Interest Rate With Pv And Fv

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When you lot invest or relieve a certain corporeality of coin, yous sometimes have a specific number in mind that yous want the investment to reach in the future. For instance, you might deposit money today and demand a gear up amount later for a down payment on a auto. The money you deposit today represents the nowadays value, while the amount to which it will grow after accumulating interest is the future value. If you know these amounts and how long you lot can permit the money sit, you can calculate the involvement charge per unit you lot need to earn to reach your financial goal.

Step 1

Divide the hereafter value by the present value. Say you want to know the almanac interest rate you need to earn to grow $1,000 today to $one,750 in 10 years. Split up $1,750 by $1,000 to go one.75.

Step 2

Divide 1 by the number of periods you lot volition leave the money invested. Each catamenia can be a month, year or another interval. In this example, you'll invest your money for x years, then divide 1 by 10 to get 0.i.

Step 3

Heighten your Stride ane event to the power of your Step 2 upshot. In this example, raise 1.75 to the 0.i ability to get 1.0576.

Step 4

Decrease one from your result. In this instance, decrease 1 from one.0576 to get 0.0576.

Pace five

Multiply your result by 100 to calculate the interest charge per unit as a percentage. This pct represents the rate your investment must earn each period to go to your time to come value. Concluding the example, multiply 0.0576 by 100 for a 5.76 percent interest charge per unit. Y'all demand to earn 5.76 per centum annually to get to $1,750 in 10 years.

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Tips

Source: https://budgeting.thenest.com/calculate-interest-rate-using-present-future-value-25993.html#:~:text=Divide%20the%20future%20value%20by,by%20%241%2C000%20to%20get%201.75.

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