MS Excel: RRI function for equivalent compound interest rate

In financial planning, business analysis, or investment modeling, it’s often important to answer a key question:

Microsoft Excel's RRI function helps answer this by calculating the equivalent compound interest rate required to turn one amount into another over a specified number of periods. Whether you're projecting asset growth or evaluating ROI over time, RRI provides a simple and elegant solution.

The RRI function returns the equivalent interest rate for the growth of an investment or loan over a number of periods assuming compounding.

It’s essentially solving the formula:

FV = PV * (1 + r)^n

Where:

• FV = future value

• PV = present value (initial investment)

• n = number of periods

• r = rate per period (what RRI solves for)

Syntax

=RRI(nper, pv, fv)

Parameter Breakdown:

Argument	Description
nper	Total number of compounding periods
pv	Present value (initial investment)
fv	Future value (target amount)

The result is the periodic compound growth rate. If your periods are annual, the result is an annual growth rate.

Example 1: Investment Growth Rate

Scenario: You invested $10,000 and it grew to $15,000 over 5 years. What is the annual growth rate?

=RRI(5, 10000, 15000)

Result: 0.08447 → or 8.45% annually

Example 2: Business Revenue Growth

Scenario: A startup’s revenue grew from $250,000 to $1,000,000 over 7 years. What was the compound annual growth rate (CAGR)?

=RRI(7, 250000, 1000000)

Result: 0.2225 → or 22.25% CAGR

This is a great way to present growth to stakeholders or in business reports.

When to Use the RRI Function

The RRI function is ideal for:

Use Case	Description
CAGR calculations	Quickly find growth rate of investments or revenue
Financial forecasting	Back-solve for rate when PV, FV, and time are known
Savings plans	Determine required return to reach a goal
Loan payoff modeling	Understand effective interest rate
Performance tracking	Evaluate annualized return of past performance

Related Functions

Function	Use Case
RATE	Calculates rate when periodic payments are involved
FV	Finds future value of an investment
PV	Finds present value
NPER	Finds number of periods needed
XIRR	Calculates non-periodic internal rate of return
IRR	For uneven periodic cash flows

Tips and Best Practices

Tip	Why It Matters
Always use positive numbers	pv and fv must both be positive for meaningful results
Use consistent periods	If working in months, nper must be in months too
RRI assumes compounding	It’s ideal for compound growth scenarios—not linear

Summary Table

Feature	Value
Function Name	RRI (Rate of Return on Investment)
Purpose	Calculates compound rate of return
Ideal For	CAGR, investment growth, revenue modeling
Inputs Required	Number of periods, present value, future value
Output	Periodic compound growth rate

Final Thoughts

The RRI function is one of Excel’s simplest yet most powerful tools for evaluating investment growth. It’s an essential addition to the toolkit of financial analysts, entrepreneurs, and investors.

Whether you're pitching to a VC, analyzing your stock portfolio, or planning for retirement, RRI provides a clear, standardized way to express compound growth over time.