PV function is used for the calculation of the present value of a loan.
The PV arguments are as follows:
Rate – That’s our interest rate.
Nper – That’s the number of periods of our loan.
pmt – That’s the fixed payment we have to pay each period for our loan
[FV] (optional argument) – The Future Value of the loan. If this argument is omitted the FV is 0.
[type] (optional argument) – when the payment is made – At the beginning (1) or the end (0) of the period. The default, if omitted, is 0 – End of the period.
The bank agreed to give you a loan. Here are the details: It is for 3 years, bearing a yearly interest rate of 10%. A payment of 105,000 USD has to be made every year.
What is the PV (Present Value) of the loan?
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.
Practice PV function
Let’s see if you know how to use the PV function!