[header] How to calculate implicit interest rate [title] Define implicit interest. [step] If you borrow money from someone and agree to pay it back with an additional amount, you are not specifying any interest or interest rate. Let's use the example that you borrow $100 , 000 from your brother and promise to pay him back in 5 years plus an extra $25 , 000. 
In order to find the interest rate that is " implicit " or " implied " in this agreement, you need to do a mathematical calculation. [substeps] The formula you will use is total amount paid/amount borrowed raised to 1/number of periods = x.