Microsoft Office Tutorials and References
In Depth Information
Using PMT to Calculate the Monthly Payment on an Automobile Loan
The PDURATION function calculates the number of periods for an investment
to reach a certain value given an interest rate. This function takes the fol-
rate — This is the assumed annual interest rate that the investment
• ppv — This is the current value of the investment.
• ffv — This is the target ending value of the investment account.
Refer to Figure 13.1 for an example. An IRA with $175,000 earning 1.29% interest
will require 135.7 years to reach $1,000,000 in value.
PMT to Calculate the Monthly Payment on an Automobile Loan
to Calculate the Monthly Payment on an Automobile Loan
Buying a car is one of the most exciting purchases. Whether the car is brand
new or just new to you, nothing attracts attention in your neighborhood like
a new car pulling into the driveway.
Before shopping for a car, you should take a 5-minute spin through Excel to
calculate potential car payments. Knowing the price that will get you to the
desired car payment will enable you to haggle with the sales rep from a po-
sition of knowledge.
The PMT function calculates the payment for a loan based on constant pay-
ments and a constant interest rate. This function takes the following argu-
rate — This is the interest rate for the loan. Note that interest rate
is often expressed as an annual rate. To calculate a monthly pay-
ment, you have to divide that rate by 12.
nper — This is the term, or the total number of payments for the loan.
• ppv — This is the present value, or the loan amount; it is also known
as the principal.
• ffv — This is an optional future value, or a cash balance you want
to attain after the last payment is made. For a car payment calcula-
tion, this should be 0. If fvis omitted, it is assumed to be 0; that is, the
future value of a loan is zero.