MicrosoftExcel2013LevelII
Handout Objective
Loan Payments Calculations
Using the PMT Function
LaGuardia Community College
31-10 Thomson Ave, Long Island City, New York 11101
Created by ISMD’s Dept. Training Team.
The PMT function returns the payment amount for a loan based on an interest rate and a constant
payment schedule.
The syntax for the PMT function is: PMT (interest_rate, number_payments, PV, FV, Type)
interest_rate = interest rate for the loan.
number_payments = number of payments for the loan.
PV = present value or principal of the loan.
FV (optional) = Future value or the loan amount outstanding after all payments have been made.
If this parameter is omitted, the PMT function assumes a FV value of 0.
Type (optional) = Indicates when the payments are due. Type can be one of the following values:
-- 0 = Payments are due at the end of the period. (Default)
-- 1 = Payments are due at the beginning of the period.
If the Type parameter is omitted, the PMT function assumes a Type value of 0.
EXAMPLE:
Find the monthly payment for a $6,400 loan at an annual rate of 8.25%. The loan is paid off in 2
years (ie: 2 x 12). All payments are made at the beginning of the period.
=PMT(8.25%/12, 2*12, 6400, 0, 1)
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1. With a blank Excel 2013 spreadsheet application open, begin by entering the following
text in its corresponding cells coordinates
A1: Loan Payment Schedule
B3: Purchase Price
B4: Manufacturers Rebate
B5: Down Payment
B6: Amount to Finance
B7: Interest Rate
B8: Term (Years)
B9: Monthly Payment
B11: Total
B12: Interest Paid on Financing
B14: Total Value Including Interest
2. We can now build our calculations based on the data entered: (keep in mind that this
spreadsheet can be reused to calculate future sales, the formulas will stay the same
however the variable such as purchase price are bound to change due to the situation of
the sale)
Non-set cells are cells that data can be changed at any time
C3: Will include a Purchase Price ex: $15000
C4: Will include a Manufacturers Rebate ex: $2000
C5: Will include a Down Payment ex: $4000
C7: Will include an Interest rate ex. 5%
C8: Will include the Term (Years) ex. 5
Set Cells are cells that include formulas, these cells are usually never modified since they
calculate the data from the non-set cells.
C6: Amount to Finance this will add the Manufacturers Rebate and Down Payment then
subtract from the Purchase Price =D5-(D6+D7)
C9: Monthly Payment will calculate the Payments for each month. (This is where the
predefined function argument will be used)
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3. To access the PMT Functions Argument Box, go to the FORMULAS tab and Click on
the fx Insert Function button from the Function Library group.
4. The Insert Function Dialog box will appear simply type Payment under the Search for a
function text box and click Go
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5. Select the PMT function and click OK
6. The Function Arguments box will appear – this is where we will include the calculations
for Rate, Nper and Pv
Rate Equals: C7/12 which is the Interest Rate divided by 12 (1 Year)
Nper Equals: C8*12 which is the Term (Years) multiplied by 12 (1 Year)
Pv Equals: -C6 which is the subtraction of the Amount being financed.
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7. Notice that as the calculations are entered the data is being calculated and displayed on
the right side of the text box, then click OK to accept and post answer to Set-cell (C9 will
contain the PMT function)
8. The formula will display on screen as follows
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9. With this data entered we can now calculate the other 3 Set cells
B11: Will include the formula for the Total: =C9*(12*C8) which will multiply the Term
(Years) by 12 (1 Year) which is then multiplied by the Monthly Payment PMT calculation.
B12: Will include the formula for the Interest Paid on Financing: =C11-C6 which will
Subtract the Total from the Amount to Finance.
B14: Will include the formula for the Total Value Including Interest: =C3-C4+C12 which will
subtract the Purchase Price from the Manufacturers Rebate and add the Interest Paid on
Financing.
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The final outcome will be displayed as follows (Keep in mind that wherever there are no
formulas data can be modified to meet the sale for that specific client, this layout can be used
over and over again as a template without the hassle of figuring out the calculations
Simply plug in the new data and view instant payment amounts).
The data with the BOLD titles should not be modified (These are known as the Set-Cells)
The data with the non-bolded titles can be modified to match sale (These are known as the Non
Set Cells)
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