If you have never checked out all the Functions available in Microsoft Excel, it is well worth your time to check them out. A function is simply a formula you don’t have to create. Simply fill in the values and the function will return a result. Today’s function is the PMT function. PMT is short for “Payment”. If you’ve ever needed to calculate what the payments would be on a loan amount this is your function.
The PMT function has 5 variables (also known as “arguments”).
Rate: The interest rate to be used. If you want to annualize the rate you would divide the rate by 12.
NPER: Number of periods/payments.
PV: Present Value or Loan Amount.
FV: Future Value. Essentially, it is the final payment amount (a balloon payment is an example).
TYPE: Logical value of 1 or 0 where 1 means payment is calculated from the beginning of the period, 0 means payment is calculated from the end of the month. The default is 0.
Once you’ve entered the arguments, the PMT function will generate a payment amount.
Note: The resulting value will be returned as a negative. (I assume that’s because when you make a payment it comes out of your bank account.)
Be sure to come back for more Microsoft Office tips and tricks.