Microsoft Office Tutorials and References

In Depth Information

**Figuring Loan Calculations**

7. Click the cell where you entered the number of payments, or just

enter the cell address.

8. Enter a comma (
,).

9. Click the cell where you entered the periodic payment amount, or just

enter the cell address.

10. Type a
), and press Enter.

As an example, assume a monthly payment amount of $600. The annual

interest rate is 5 percent. There are 24 monthly payments. Figure 5-8 shows a

worksheet with these figures.

With these assumptions, the loan principal is $13,676. Altering any of the

parameters will cause PV to return a different amount of principal. For

example, raising the interest rate to 7.5 percent tells you that you can only borrow

$13,333. Although you may often think of how much you’re borrowing, having

interest in the interest is just as important!

You can use two optional arguments with PV:

✓
Future Value:
The amount you want the loan to be worth at the end of

its life. The default is 0.

✓
Type:
This value tells the function whether payments are applied at the

end of the period or the beginning of the period. A value of 0 indicates

the end of the period. A value of 1 indicates the beginning of the period.

The default is 0.

These optional arguments, when used, become the respective fifth and sixth

arguments.

Figure 5-8:

The PV

function

calculates

the principal

amount

of a loan.