PMT function is used to calculate the amount to be paid in each period on a loan or other financial instrument, such as bonds.
rate – The periodic interest rate
nper – The number of periods for payment
pv – The Present Value (PV) of the loan, or any other instrument.
[fv] – The Future Value (FV) – the amount left after all payments are done. This argument is optional, meaning that if left empty, the default FV will be 0 (meaning no balance is left)
[type] – Are payments being made at the beginning or at the end of each period. 1 is for beginning, 0 is for the end of the period. As this argument is optional, if omitted, the default is 0 (End of period)
Let’s assume we have taken a loan in the of 150,000$ to buy ourselves a brand new sports car 🙂
The loan is for 10 years, bearing a yearly interest rate of 5%. What would be the annual payment?
In this example, we did not type any value in [fv] as the Future Value of the loan is 0. We kept [type] empty as well, meaning that payments are made at the end of each period.