BEHIND THE NUMBERS
How this calculation works
Worked example
After year one, £100 becomes £110 and the £10 deposit makes £120. After year two, £120 becomes £132 and another £10 makes £142.
Example result: £142.00
Use one viewpoint for the signs
For a borrower, the amount received today is a positive PV and repayments are negative PMT. For a saver, the initial deposit and later contributions are negative, with a positive future balance.
Match the rate to the period
If N counts months, the interest rate here is monthly. This explicit per-period convention differs from an I/Y key that may use separate payments-per-year and compounding settings.
When payments and compounding differ
A 12% nominal annual rate compounded monthly means 1% interest each month. With quarterly payments, three monthly growth factors are combined: 1.01³ − 1 = 3.0301% per quarter. Set C/Y to 12 and P/Y to 4, and enter the total number of quarterly payments as N.
Assumptions and rounding
- All payments are equal and regularly spaced. Rate and payment periods match.
- Rate solving requires one sign change across the effective cash flows and a whole number of periods; loans and accumulating savings are supported.
Questions about this calculator
Why is the payment negative?
The payment is money leaving your chosen viewpoint. Opposite signs allow the same equation to represent borrowing and saving.
Why is a rate solution rejected?
A stream with several sign changes can have multiple rates. The solver combines payments occurring at the same time and requires exactly one sign change, covering both loans and contributions followed by a final savings balance.