"PMT" function quary

  • Thread starter Thread starter mikebrown
  • Start date Start date
M

mikebrown

Can someone please explain the PMT function in a plain mathamatica
equation for the following example:

monthly re-payment = ?
Price = $170525
Interest Rate = 16.5
Repayment period = 48 months
Resudal = 40%

I understand how the excel PMT function works, but i would like to kno
how excel breaks the formula down to incorporate these values.

Thanks, Mik
 
The formula is in Help, under PV. Is that what you are looking for?

--
Regards,
Fred
Please reply to newsgroup, not e-mail


mikebrown said:
Can someone please explain the PMT function in a plain mathamatical
equation for the following example:

monthly re-payment = ?
Price = $170525
Interest Rate = 16.5
Repayment period = 48 months
Resudal = 40%

I understand how the excel PMT function works, but i would like to know
how excel breaks the formula down to incorporate these values.

Thanks, Mike


------------------------------------------------



~~Now Available: Financial Statements.xls, a step by step guide to
Click to expand...
creating financial statements
 
Hi Fred,

thanks for replying to my post. I took a look at the excel help, bu
the formula they use still uses the PMT function in the equation.
I'm looking for an equation I can manually work out with the differen
variables.

Thanks, Mik
 
You can get the equation you want by solving for PMT.

Excel Help says:

0 = FV + PV*(1+rate)^nper + PMT*(1+rate*type)*(((1+rate)^nper-1)/rate)

Subtract FV and PV*(1+rate)^nper from both sides:

-FV - PV*(1+rate)^nper = PMT*(1+rate*type)*(((1+rate)^nper-1)/rate)

Divide to isolate PMT:

PMT = (-FV - PV*(1+rate)^nper) / ((1+rate*type)*(((1+rate)^nper-1)/rate))

In your case, type is 0, so this simplifies to:

PMT = (-FV - PV*(1+rate)^nper) / (((1+rate)^nper-1)/rate)

In your example, you wanted the payment as follows:

=PMT(16.5%/12,48,-170525,170525*40%)

which works out to $3,863.79. Substitute the variables into the above
equation and PMT works out to be exactly the same amount.


--
Regards,
Fred
Please reply to newsgroup, not e-mail


mikebrown said:
Hi Fred,

thanks for replying to my post. I took a look at the excel help, but
the formula they use still uses the PMT function in the equation.
I'm looking for an equation I can manually work out with the different
variables.

Thanks, Mike


------------------------------------------------



~~Now Available: Financial Statements.xls, a step by step guide to
Click to expand...
creating financial statements
 
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