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EXCEL PV FUNCTION
Excel PV Function Introduction
This function estimates the present value of a loan or investment With a constant interest rate,
Description of Excel PV Function
Syntax:
=PV (rate, nper, pmt, [fv], [type])
Parameter list:
- The interest rate each period is known as the rate. If the yearly rate is 10% and the payments are made monthly, the rate is 10% /12.
- nper – the overall number of payment periods. If the loan is for two years, multiply 2 by 12 to get 24 periods.
- pmt – each period’s payout If pmt isn’t specified, the fv parameter must be specified.
- fv – [Optional] the cash balance you’d want to have following the final payment. If fv is missing, the cash payment at the conclusion of the loan will be zero. If fv isn’t specified, the pmt parameter must be specified.
- type – [Optional] When will payment be due? 0 or omitted indicates the end of the period, whereas 1 indicates the start of the period.
Step By Step Guide of PV Function
We’re going to calculate the loan amount in this case. The payment amount is the monthly payment amount, including principle and interest (-negative sign to show cash is leaving your bank), the interest rate is 8%, which we divide by 12 to get the monthly interest rate, and the term is 48 months (12 months x 4).
If you pay quarterly, the rate will be 8% /4 and the nper will be 16 (4 periods x 4 years).
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