PMT function is one of the financial function in excel, which calculates the periodic payment required to pay off a loan or investment.
= PMT(rate, nper, pv, [fv], [type])
Interest rate per period.
Number of period over which loan or investment to be paid.
Present value of the loan amount.
This is optional parameter that specifies the future value of loan amount by default it takes zero.
This is also an optional argument define payment is made at the begning of the month or end.
0 – Payment made at the end of the month
1 – Payment made at the beginning of the month
In the above spreadsheet screenshot, we have used PMT function in the cell “D6” to calculate monthly payment for loan amount.
= PMT (D3/12, D4*12, -D2)
=PMT(rate/12, year*12, – loan amount)
D2 = Loan Amount (taken negative in the function because considered as debt)
D3 = Interest rate (payment are made monthly so we have divided rate by 12)
D4 = number of payments ( to calculate the monthly payment, years multiplied by 12)
D6 = Monthly Payment (using PMT function)