PMT calculation

[gidsy]

Hi,

I am trying to find out the formula behind this function. I need to replicate it in a document and can't just write PMT(rate,nper,pv,fv,type) and explain what each item is...I need to explain how this function works..

Is there anything in Excel help or other sources that will give me this?

Thanx in advance.

 

[Oaktree]

See if Excel help for PV answers your question...

 

[RalphA]

Edited:
See my post below

 

[RalphA]

Here is your answer.

Note that he rate (R) is expressed in % per period, as in 5%/12 for monthly payments, or in per unit, as in 5/1200, and the number of periods is expressed in months, as in 360 for 30 years.

As an example to check yourself with:
PV = 100000
R = 5%
n = 360

Payment = (100000*5%/12)/(1-(1+5%/12)^(-360) = 536.82, or
Payment = (100000*5/1200)/(1-(1+5/1200)^(-360) = 536.82

Date: 03/23/2005 at 23:18:24
From: Doctor Wilko
Subject: Re: Amortization

Hi Gameel,

Thanks for writing to Dr. Math!

The monthly payment can be found by using the following formula:

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e., interest
periods per year * number of years)

If you're familiar with Excel, you can also use the PMT function in to
get the monthly payment.

Does this help? Please write back if you have further questions.

- Doctor Wilko, The Math Forum
http://mathforum.org/dr.math/