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Solving for Discount Rate

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This video explains how to solve for discount rate. Once you know the relationship between present value, future value and discount rate, then you can represent that in the form of an equation. Once you have the equation, you can solve for an unknown quantity given all other things in that equation. This is what we call gymnastics.

You can use that equation to construct a cell formula to solve for the un known quantity. All that you need to do is to store input values in a given cell and use those cell references in the cell formula.

Why do we compute discount rate? We want to compare discount rate to compare with the rate of return from other opportunities that offer future benefit. This means, by computing discount rate, we can evaluate this future benefit with other future benefits that might be on the offer during that point in time.