Microsoft Office

Creating Formulas for Financial Applications 16
TABLE 16.1
Financial Function Arguments
Function Argument
rate
nper
per
pmt
fb
type
Description
The interest rate per period. If the rate is expressed as an annual interest rate, you must divide it
by the number of periods.
The total number of payment periods.
A particular period. The period must be less than or equal to nper.
The payment made each period (a constant value that does not change).
The future value after the last payment is made. If you omit fv, it is assumed to be 0. (The future
value of a loan, for example, is 0.)
Indicates when payments are due — either 0 (due at the end of the period) or 1 (due at the
beginning of the period). If you omit type, it is assumed to be 0.
The PMT function
The PMT function returns the loan payment (principal plus interest) per period, assuming constant payment
amounts and a fixed interest rate. The syntax for the PMT function is
PMT(rate,nper,pv,fv,type)
The following formula returns the monthly payment amount for a $5,000 loan with a 6 percent annual percentage
rate. The loan has a term of four years (48 months).
=PMT(.06/12,48,-5000)
This formula returns $117.43, the monthly payment for the loan. Notice that the third argument (pv, for
present value) is negative and represents money owed.
The PPMT function
The PPMT function returns the principal part of a loan payment for a given period, assuming constant payment
amounts and a fixed interest rate. The syntax for the PPMT function is
PPMT(rate,per,nper,pv,fv,type)
The following formula returns the amount paid to principal for the first month of a $5,000 loan with a 6
percent annual percentage rate. The loan has a term of four years (48 months).
=PPMT(.06/12,1,48,-5000)
The formula returns $92.43 for the principal, which is about 78.7 percent of the total loan payment. If I
change the second argument to 48 (to calculate the principal amount for the last payment), the formula
returns $116.84, or about 99.5 percent of the total loan payment.
To calculate the cumulative principal paid between any two payment periods, use the
NOTE
CUMPRINC function. This function uses two additional arguments: start_period and
end_period. In Excel versions prior to Excel 2007, the CUMPRINC is available only when you install the
Analysis ToolPak add-in.
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