In the example, this reference is cell B3. In the By changing cell box, enter the reference for the cell that contains the value that you want to adjust. Note that this number is negative because it represents a payment. In the To value box, type the formula result that you want. In the example, this reference is cell B4. In the Set cell box, enter the reference for the cell that contains the formula that you want to resolve. On the Data tab, in the Data Tools group, click What-If Analysis, and then click Goal Seek. Use Goal Seek to determine the interest rate The formula divides the value in B3 by 12 because you specified a monthly payment, and the PMT function assumes an annual interest rate.īecause there is no value in cell B3, Excel assumes a 0% interest rate and, using the values in the example, returns a payment of $555.56. The formula also refers to cell B3, which is where you will specify that Goal Seek put the interest rate. The formula refers to cells B1 and B2, which contain values that you specified in preceding steps. You don't enter that amount here, because you want to use Goal Seek to determine the interest rate, and Goal Seek requires that you start with a formula. In this example, you want to pay $900 each month. This formula calculates the payment amount. Next, add the formula for which you have a goal. Instead, you add the formula to the worksheet and specify the payment value at a later step, when you use Goal Seek. Note: Although you know the payment amount that you want, you do not enter it as a value, because the payment amount is a result of the formula. This is the number of months that you want to pay off the loan. This is the amount that you want to borrow. Prepare the worksheetįirst, add some labels in the first column to make it easier to read the worksheet. In this example, the monthly payment amount is the goal that you seek. The PMT function calculates a monthly payment amount. Let's look at the preceding example, step-by-step.īecause you want to calculate the loan interest rate needed to meet your goal, you use the PMT function. For more information, see Define and solve a problem by using Solver. If you want to accept more than one input value for example, both the loan amount and the monthly payment amount for a loan, you use the Solver add-in. Excel Solver is a powerful method to solve optimization problem.Note: Goal Seek works only with one variable input value. If you have a complex problem which contains multiple equations and multiple constraints and you are asked to find the optimal solution, you should look for Excel's Solver Add-In instead of Goal Seek. As shown in the second case study, it takes time to transform equation of loan payment and calculate the terms without using Goal Seek. It saves a lot of time when it is difficult to derive a formula to calculate unknown value. Goal Seek is very helpful for quickly solving any financial and statistical formula for a single unknown value. Solution : Goal Seek found the solution and it is required to pay 50 monthly payments when $4000 is paid monthly in installment. In By changing cell:, give cell reference of C4 ( Refer figure 2).Make sure it is negative since it is a payment. In Set cell:, enter reference of cell C6.Go to Data tab and then click on What-If Analysis and select Goal Seek.Since C5 is annual interest rate, we need to divide it by 12 Enter formula =PMT(C5/12,C4,C3) in cell C6 (Refer the image above).of Payments (Monthly) and Annual Interest Rate from cell C3 through C5.