Place the cursor in Cell A3, click the "AutoSum ( ∑ )" button located on the top toolbar of Excel and hit "Enter. The degree of variance is generally based on factors such as another interest rate, inflation, or a market index. Step 1 However, when you accept periodic payments, the Internal Revenue Service assumes that the contract price reflects the time value of money, meaning the price includes interest charges for the payment delays. For instance, an 8% interest rate for borrowing $100 a year will obligate a person to pay $108 at year end. Examples of real-world applications of interest rates include mortgage rates, the charge on a person's outstanding debt on a credit card, business loans to fund capital projects, the growth of retirement funds, amortization of long-term assets, the discount offered by a supplier to a buyer for paying off an invoice earlier, and much, much more.There are two methods for calculating interest. Most credit scores in U.S. fall between 600 and 700.The higher a borrower's credit score, the more favorable the interest rate they may receive. For example, if the installment contract is for four equal payments of $5,000, the Excel formula for calculating the present value of the third payment is =5000/(1.04_1.04_1.04) and =5000/(1.04_1.04_1.04*1.04) for the fourth payment.The IRS requires that you report imputed interest as taxable income on your tax return each year. Simple interest is calculated as a percentage of principal only, while compound interest is calculated as a percentage the principal along with any accrued interest. Anything higher than 750 is considered excellent and will receive the best interest rates. Good credit scores are built over time through timely payments, low credit utilization, and many other factors. A credit score is a number between 300 and 850 that represents a borrower's creditworthiness; the higher the better. From the perspective of a lender, they are more hesitant to lend to borrowers with low credit scores and/or a history of bankruptcy and missed credit card payments than they would be to borrowers with clean histories of timely mortgage and auto payments. For example, a credit card issuer can raise the interest rate on an individual's credit card if they start missing many payments.Although individual credit standing is one of the most important determinants of the favorability of the interest rates borrowers receive, there are other considerations they can take note of.The relationship between real interest rate, inflation, and the nominal rate is shown by the following equation:In this equation, nominal rate is generally the figure being discussed when "interest rate" is mentioned.