Excel: PMT & FV Functions

PMT

PMT function is a financial function that returns the periodic payment for a loan. You can use the PMT function to figure out payments for a loan, given the loan amount, number of periods, and interest rate. The PMT function can be used to figure out the future payments for a loan, assuming constant payments and a constant interest rate.

For example, if you are borrowing $5,000 on a 24 month loan with an annual interest rate of 8 percent. PMT can tell you what your monthly payments be and how much principal and interest you are paying each month. Be sure you are consistent with the units you supply for rate and nper. If you make monthly payments on a three-year loan at an annual interest rate of 12 percent, use 12%/12 for rate and 3*12 for nper. For annual payments on the same loan, use 12 percent for rate and 3 for nper. The payment returned by PMT includes principal and interest but will not include any taxes, reserve payments, or fees.

Arguments of PMT Function are:

rate - The interest rate for the loan.

nper - The total number of payments for the loan.

pv - The present value, or total value of all loan payments now.

fv - [optional] The future value, or a cash balance you want after the last payment is made. Defaults to 0 (zero).

type - [optional] When payments are due. 0 = end of period. 1 = beginning of period. Default is 0.

FV

FV function is a financial function that returns the future value of an investment. You can use the FV function to get the future value of an investment assuming periodic, constant payments with a constant interest rate. The future value (FV) function calculates the future value of an investment assuming periodic, constant payments with a constant interest rate. If pmt is for cash out (i.e deposits to saving, etc), payment value must be negative; for cash received (income, dividends), payment value must be positive. Units for rate and nper must be consistent. For example, if you make monthly payments on a four-year loan at 12 percent annual interest, use 12%/12 (annual rate/12 = monthly interest rate) for rate and 4*12 (48 payments total) for nper. If you make annual payments on the same loan, use 12% (annual interest) for rate and 4 (4 payments total) for nper.

Arguments of FV Function:

rate - The interest rate per period.

nper - The total number of payment periods.

pmt - The payment made each period. Must be entered as a negative number.

pv - [optional] The present value of future payments. If omitted, assumed to be zero. Must be entered as a negative number.

type - [optional] When payments are due. 0 = end of period, 1 = beginning of period. Default is 0.