Loans and Investments: PMT, FV and NPV

Three finance functions you can use on real decisions:

PMT(rate, periods, loan) is the regular payment on a loan. The rate is per period (a 12% yearly rate paid monthly is 1% = 0.12/12). Excel treats money received as positive and money paid as negative, so pass the loan as -B1 to get the payment as a positive number.
FV(rate, periods, payment) is what regular savings grow to.
NPV(rate, cash flows...) is the value today of future cash flows, discounted at a rate.

In this course each line of an example is one cell: the address, a colon, then what is in the cell. A line starting with = is a formula. Press Run to see the sheet with every formula worked out.

Exampleexcel

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Quick check

In PMT, if the yearly rate is 12% and payments are monthly, the rate argument is...

0.12/120.1212

Your turn: write the code

In B4 show the monthly payment (rounded to 2 decimals) for a loan of 5000 at 1% a month over 6 months, using PMT with the loan entered as -B1.

Finish the quick check (and any code exercise) to complete this lesson, or mark it done yourself.

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