How do I use the PV function in Excel?
The PV function in Excel is used to calculate the present value of an investment. It is often used in finance and accounting to determine the value of future payments or cash flows. The formula for the PV function is:
=PV(rate,nper,pmt,[fv],[type])
Where:
- Rate: The interest rate per period.
- Nper: The total number of payment periods in the investment.
- Pmt: The payment made each period. This must remain constant throughout the investment.
- Fv: The future value of the investment. This is an optional parameter and can be left out if the future value is 0.
- Type: Specifies when payments are due. 1 means payments are due at the beginning of the period, 0 or omitted means payments are due at the end of the period.
Here is an example of how to use the PV function:
- Select a cell where you want the result of the calculation to appear.
- Type =PV(0.05, 10, 1000)
- Press enter.
In this example, the present value of an investment with a 5% interest rate, 10 payment periods, and a payment of $1000 per period is $7,722.70.
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