Microsoft Office

Part II
Working with Formulas and Functions
The IPMT Function
The IPMT function returns the interest part of a loan payment for a given period, assuming constant payment
amounts and a fixed interest rate. The syntax for the IPMT function is
IPMT(rate,per,nper,pv,fv,type)
The following formula returns the amount paid to interest 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).
=IPMT(.06/12,1,48,-5000)
This formula returns an interest amount of $25.00. By the last payment period for the loan, the interest
payment is only $0.58.
To calculate the cumulative interest paid between any two payment periods use the CUMIPMT
function. This function uses two additional arguments: start_period and end_period. In Excel
versions prior to Excel 2007, the CUMIPMT is available only when you install the Analysis ToolPak add-in.
NOTE
The RATE function
The RATE function returns the periodic interest rate of a loan, given the number of payment periods, the
periodic payment amount, and the loan amount. The syntax for the RATE function is
RATE(nper,pmt,pv,fv,type,guess)
The following formula calculates the annual interest rate for a 48-month loan for $5,000 that has a monthly
payment amount of $117.43.
=RATE(48,117.43,-5000)*12
This formula returns 6.00 percent. Notice that the result of the function multiplies by 12 to get the annual
percentage rate.
The NPER function
The NPER function returns the number of payment periods for a loan, given the loan’s amount, interest rate,
and periodic payment amount. The syntax for the NPER function is
NPER(rate,pmt,pv,fv,type)
The following formula calculates the number of payment periods for a $5,000 loan that has a monthly payment
amount of $117.43. The loan has a 6 percent annual interest rate.
=NPER(0.06/12,117.43,-5000)
This formula returns 47.997 (that is, 48 months). The monthly payment was rounded to the nearest penny,
causing the minor discrepancy.
The PV Function
The PV function returns the present value (that is, the original loan amount) for a loan, given the interest
rate, the number of periods, and the periodic payment amount. The syntax for the PV function is
PV(rate,nper,pmt,fv,type)
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