Description
The Excel PMT function calculates the constant periodic payment required to pay off (or partially pay off) a loan or investment, with a constant interest rate, over a specified period.
The syntax of the function is :
PMT( rate, nper, pv, [fv], [type] )
Where the arguments are as follows:
Cash Flow Convention :
Note that, in line with the general cash flow convention, outgoing payments are represented by negative numbers and incoming payments are represented by positive numbers. This is seen in the examples below.
Excel Pmt Function Examples
In each of the examples below, the spreadsheet on the left shows the format of the Pmt function, and the spreadsheet on the right shows the result.
Example 1
The following spreadsheet shows the Excel Pmt function used to calculate the monthly payments on a loan of $50,000 which is to be paid off in full after 5 years. Interest is charged at a rate of 5% per year and the payment to the loan is to be made at the end of each month.
Example 2
In this example, the spreadsheet below shows the Excel Pmt function being used to calculate the quarterly payments on a loan of $10,000 that is to be reduced to $5,000 over a period of 2 years. Interest is charged at a rate of 3.5% per year and the payment is to be made at the beginning of each quarter.
Pmt Function Errors
If you get an error from the Excel Pmt function, this is likely to be one of the following:
Common Errors
Also, the following problem is encountered by some users:
Common Problem
The result from the Excel Pmt function is much higher or much lower than expected.
Possible Reason
Many users, when calculating monthly or quarterly payments, forget to convert the interest rate or the number of periods to months or quarters.
Solve this problem by ensuring that the rate and the nper arguments are expressed in the correct units. i.e. :
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