Question

State the parameters of Excel’s PMT function. What is the use of this function?

Hint:

PMT is useful for calculating regular loan payments, making it an essential tool for financial planning and loan management.

Answer 1

Parameters of PMT Function:} The PMT function in Excel calculates the payment for a loan based on constant payments and a constant interest rate. Its parameters are:
1. Rate:} The interest rate per period.
2. Nper:} Total number of payment periods in the loan term.
3. Pv:} Present value or the principal loan amount.
4. Fv (optional):} The future value or the cash balance you want after the last payment (default is 0).
5. Type (optional):} Indicates when payments are due: 0 for end of the period (default) and 1 for beginning of the period.
Use of PMT Function:} - The PMT function helps determine the regular payment amount required to pay off a loan over a specified period, considering the loan's interest rate and term. - It is widely used in financial modeling and loan calculations.