The PMT function calculates the amount of payment required per period to pay off a loan or mortgage at the given principal, interest rate per period, and number of periods. Ability calculates the payment based on the following formula:
Often the payment amounts end up as fractional numbers. In such cases, you can include the ROUND function (see ROUND) to calculate the payments as even amounts.
To find the payments required to pay off a $17,000 loan, at 14.25% interest per annum, over a period of 3 years, use the following formula:
PMT(17000, 14.25%, 3)
Ability calculates the payments and displays 7353.17 or $7,353.17 per year (depending on the currency formatting of the cell – use the Number command from the Format menu to change it).
To find the payments required per period when the interest is compounded monthly, use PMT in conjunction with EFFECT (see EFFECT) as follows:
PMT(17000, EFFECT(14.25%, 12) / 12, 36)
Ability calculates the monthly payments at $591.13.
See also: