CFI-Excel-eBook

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The Corporate Finance Institute ExcelPMTGet the periodic payment for a loanrate nper pv fv typeWhat is the PMT Function?The PMT function is categorized under financial Excel functions. The functionhelps calculate the total payment (principal and interest) required to settle aloan or an investment with a fixed interest rate over a specific time period.Formula=PMT(rate, nper, pv, [fv], [type])The PMT function uses the following arguments:1. Rate (required argument) – The interest rate of the loan.2. Nper (required argument) – The total number of payments for the loantaken.3. Pv (required argument) – The present value or total amount that aseries of future payments is worth now. It is also termed as principal.4. Fv (optional argument) – The FV or a cash balance we want to attainafter the last payment is made. If fv is omitted, it is assumed to be 0(zero), that is, the future value of a loan is 0.5. Type (optional argument) – The security’s price. It is the type of daycount basis to use. The possible values of basis are:How to use the PMT Function in Excel?As a worksheet function, the PMT function can be entered as part of a formulain a cell of a worksheet. To understand the uses of PMT, let us consider anexample:corporatefinanceinstitute.com68
The Corporate Finance Institute ExcelExample 1Let’s assume that we need to invest in such a manner that after two years, we’llreceive $75,000. The rate of interest is 3.5% per year and the payment will bemade at the start of each month. The details are:The formula used is:We get the results below:corporatefinanceinstitute.com69
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