Financial Calculation Software, a Snap with MS Excel - Usage of function PMT
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Functions can be inserted into cells by clicking on insert in the main menu, and clicking on Function... in the drop down as shown in the next picture. The calculated value of the function will be inserted into cell A1.
This brings up the Insert function window, wherein you either search for what you are looking for, or click on the or select a category: drop-down which gives access to a number of categories of functions. From this list choose the Financial Category. There are a large number of financial functions that can be chosen from the Select a function: list. You will observe that as each function is selected, the definition changes in this window as shown. In this case PMT is chosen, and therefore you will see the definition of the function and a short description of what the function accomplishes. There is also a hyperlink, Help on this function.
Clicking on this hyperlink will take you to this online help page as shown, which gives a more detailed explanation of the function with examples of the usage.
On the other hand , if you click on OK in the Insert function window you will pop up an interactive data entry page, Function Arguments as shown in the next picture. This is the interface into which you enter the three mandatory arguments (Rate, Nper, PV), and two optional arguments (Fv and Type).
We are considering taking out a loan of $10,000.00, at an annual rate of 8% to be paid off in 10 months. Since we are paying out every month, the rate to be inserted into this interactive dialog is 8%/12. Start with the first box and enter 8%/12, move to the next and enter 10 for Nper, and then move to the third to enter 10000. Since the next two are optional, you may just click OK. The PMT to be paid out every month is $1,037.03 as shown in the picture that follows. Since values were not entered for Fv and Type, they were assumed to be both 0. This means, by default, the payments have to be made at the end of the period and the loan will be completely paid off.
Next: A simple spread sheet to calculate PMT >>
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