Q:

How do you use the PMT fucntion in Microsoft Excel?

A:

Quick Answer

To use the PMT function, correctly use the function’s formula syntax. The function syntax is PMT (rate, nper, pv, [fv], [type]), where rate is the interest rate, nper is the number of payments, pv is the present value, fv is the future value and type is the status of payment.

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Full Answer

The PMT function in Excel calculates the payment for a loan based on constant payment and a constant interest rate. The first mandatory argument (rate) specifies the interest rate for the loan. The nper argument, also mandatory, is the total number of payments for the loan. The pv mandatory argument is the total amount that a series of future payments is worth currently.

The two optional arguments included are the future value and type. The fv argument within the syntax is the cash balance that the owner wishes to attain after completing the last payment. If the user omits the future value in the syntax, the compiler assumes it to be zero.

The type argument is an indication of the status of the payment. Set type to zero for indicating the end of the period, and set it to one to indicate the beginning of the period. Omitting the type argument causes the compiler to consider it as zero.

The result returned by the PMT function includes only the principal and interest value and does not include any taxes, reserve payments or fees associated with the loan.

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