Highline Excel 2013 Class Video 50: Financial Functions: PMT, RATE, NPER and FV 12 Examples

Num. Topics:
1 PMT function from Borrower point of view
2 PMT function from Lender point of view
3 PMT function with Balloon payment at end
4 PMT function when payments don't start for 1 year
5 RATE function: Adjusted APR when there are Points and Fees
6 PMT and other formulas: Create an Amortization Table
7 CUMIPMT function: to calculate total interest over the life of a loan
8 NPER function: How long to pay off your Credit Card Bill
9 FV to estimate what you will have at retirement
10 PMT to estimate how much you can withdraw each month after you retire
11 Calculate how total you can withdraw after retirement and how much you actually deposited while saving.
12 PMT to calculate how much you have to save each month to have a million dollars when you retire.

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PMT function:
PMT function calculates the period payment for a loan (For the Borrower or the Lender).
Each pmt must be the same. Periodic PMT Definition:
Time period between each pmt must be the same. Each pmt must be the same.
Interest rate must remain constant. Time period between each pmt must be the same.
PMT function arguments:
rate = period rate (month, quarter, yearly, etc.)
nper = total number of periods
pv = amount of loan on the day it is issued (present value of future cash flows)
fv = value of loan on last day (balloon payment)
type =
End = omitted = 1 = payment at end of period
Begin = 0 = payment at beginning of period

Cash Flow matters in Finance.

Cash going out of the wallet is negative.
Cash coming into the wallet is positive.
PMT function Cash Flows:
For the borrow the PV is positive, the PMT is negative, and the FV is negative.
For the Lender the PV is negative, the PMT is positive, and the FV is positive.
Be consistent with your unit of time!
If you are calculating monthly payment, you need monthly interest rate and total number of months!
The period can be monthly, quarterly, yearly or any other length.

FV function:
Calculates the future value of an investment, for either a lump sum or a savings plan
Interest rate must remain constant.
Each pmt must be the same.
Time period between each pmt must be the same.
FV arguments:
rate = period rate (month, quarter, yearly, etc.)
nper = total number of periods
pmt = equal periodic payments
pv = amount of loan on the day it is issued (present value of future cash flows)
type =
End = omitted = 1 = payment at end of period
Begin = 0 = payment at beginning of period

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RATE function:
Calculates the period rate
Each pmt must be the same.
Time period between each pmt must be the same.
Interest rate will remain constant.
RATE arguments:
nper = total number of periods
pmt = equal periodic payments
pv = amount of loan on the day it is issued (present value of future cash flows)
fv = value of loan on last day (balloon payment)
type =
End = omitted = 1 = payment at end of period
Begin = 0 = payment at beginning of period

NPER function:
Calculates the total number of periods
Each pmt must be the same.
Time period between each PMT must be the same.
Interest rate must remain constant.
NPER arguments:
rate = period rate (month, quarter, yearly, etc.)
pmt = equal periodic payments
pv = amount of loan on the day it is issued (present value of future cash flows)
fv = value of loan on last day (balloon payment)
type =
End = omitted = 1 = payment at end of period
Begin = 0 = payment at beginning of period

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1 PMT function from Borrower point of view
Price of Car 34,799.00 Annual Interest Rate 6.50%
Down Payment 10,000.00 Monthly Interest Rate
Loan Amount Years for Loan 5
PMT end of period Total Months
Monthly Payment 0.00 Periods per Year 12
PMT begin of period Type, 0 = End, 1 = Beg 1

2 PMT function from Lender point of view

Price of Car 34,799.00 Annual Interest Rate 6.50%
Down Payment 10,000.00 Monthly Interest Rate
Loan Amount Years for Loan 5
Monthly Payment Total Months
Monthly Payment 0.00 Periods per Year 12

3 PMT function with Balloon payment at end Borrower point of view

Price of Car 50,000.00 Annual Interest Rate 5.25%
Down Payment 5,000.00 Monthly Interest Rate
Loan Amount 45,000.00 Years for Loan 3
Balloon Payment -5,000.00 Total Months
Monthly Payment Periods per Year 12

4 PMT function when payments don't start for 1 year Borrower point of view
Loan Amount 1,000,000.00 Annual Interest Rate 8.50%
Years payment is put
off 1 Period Interest Rate
FV after 1 year Years for Loan 6
Period Payment Total Periods
Period Payment -50,000.00 Periods per Year 4
wer point of view

wer point of view

Loan Amount 200,000.00
Annual Interest Rate 0.05
Years for Loan 30
Periods per Year 12
Period Interest Rate
Total Periods
PMT

Periods PMT Period Interest Loan Reduction Balance

 How long to pay off your credit Card if you pay only the minimum PMT
required?
Balance = 7,500.00
APR = 18.00%
Periods per year 12
Minimum Monthly PMT = -125.00
nper = NPER function =
Years = nper/12
 Savings plan:
If I put $50 (PMT) in the bank at the end of each month for 50 years, how much will I have when I retire? What is the
future value?
Periodic Payment $50.00 pmt
Years 50

# Compounding Periods per Year 12

Annual Interest Rate 0.1
Period Rate rate
Total Periods nper
Future Value fv =FV(rate , nper , -pmt)

Check: $866,219.54 =B2*((1+B5/B4)^(B3*B4)-1)/(B5/B4)

If I want to be a millionaire, how much do I have to put in the bank at the end of each month. What is the PMT?

Future Value $1,000,000.00 fv

Years 35

# Compounding Periods per Year 12

Annual Interest Rate 0.1
Period Rate rate
Total Periods nper
Periodic Payment pmt =PMT(rate , nper , , FV)

Check: $263.39 =B14/(((1+B17/B16)^(B15*B16)-1)/(B17/B16))

ave when I retire? What is the

ate , nper , -pmt)

)-1)/(B5/B4)

h month. What is the PMT?

(rate , nper , , FV)

15*B16)-1)/(B17/B16))
Calculate the PMT for the three examples below.

PMT function from Borrower point of view

Price of Car 25,000.00
Down Payment 2,500.00
Loan Amount
Annual Interest Rate 3.75%
Periods per Year 12
Monthly Interest Rate
Years for Loan 6
Total Months
Type End
PMT end of period

PMT function from Lender point of view

Price of Car 25,000.00
Down Payment 2,500.00
Loan Amount
Annual Interest Rate 3.75%
Periods per Year 12
Monthly Interest Rate
Years for Loan 6
Total Months
Type End
PMT end of period

PMT function with Balloon payment at end

Price of Car 50,000.00
Down Payment 5,000.00
Loan Amount
Balloon Payment -5,000.00
Monthly Payment
Annual Interest Rate 5.25%
Monthly Interest Rate
Years for Loan 3
Total Months
Periods per Year 12
Create an amortization table for the loan data below. Then calculate the total interest paid over the life of the loan.

Loan Amount 375,500.00

Annual Interest Rate 0.0415
Years for Loan 30
Periods per Year 12
Period Interest Rate 0.00345833333333
Total Periods 360
PMT -1,825.32

Periods PMT Period Interest Loan Reduction Balance

r the life of the loan.
If your credit card balance is $5000 and the minimum monthly payment (at end of each month) is $100,
if the Annual Credit Card Rate is 16%, how many years does it take to pay off?
For a 35 year savings plan (at end of each month) that pays a 6% Annual Rate,
how much do you need to deposit each month to have $400,000 in 35 years?
Play around and calculate your own savings plan (retirement savings).