How do I use the PMT function in Excel?

The PMT function in Excel is used to calculate the periodic payment for a loan with a fixed interest rate and fixed term. The function returns the payment value in negative, which represents the cash outflow or payment made to the lender. The syntax for the PMT function is as follows:

PMT(rate, nper, pv, [fv], [type])

where:

• rate: the interest rate per period, expressed as a decimal.
• nper: the total number of payment periods for the loan.
• pv: the present value or total amount of the loan.
• fv (optional): the future value or cash balance you want to achieve after the last payment is made. If omitted, it is assumed to be 0.
• type (optional): the type of payment made, either 0 or 1. If omitted, it is assumed to be 0.

To use the PMT function in Excel, select the cell where you want to display the payment value, and enter the function with the appropriate arguments. For example, to calculate the monthly payment for a loan of $100,000 with an interest rate of 5% per year and a term of 20 years, enter the following formula:

=PMT(5%/12,20*12,100000)

This will return a value of -$660.39, which represents the monthly payment for the loan.

It is important to note that the PMT function assumes that payments are made at the end of each period, and that the interest rate is constant throughout the term of the loan. If either of these assumptions are not true, the function may not provide an accurate result.