TVM Functions in EXCEL
Order of Variables =
(Rate, Nper, Pmt, Pv, Fv,Type, Guess)
Future Value = FV(Rate,Nper,Pmt,PV,Type)
Present Value = PV(rate,nper,pmt,fv,type)
No. of Periods = NPER(rate, pmt, pv, fv, type)
Payment = PMT(rate,nper,pv,fv,type)
Rate = RATE(nper,pmt,pv,fv,type,guess)
Rate is the interest rate per period. For example, if you obtain an automobile loan at a 10 percent annual interest rate and make monthly payments,
your interest rate per month is 10%/12, or 0.83%. You would enter 10%/12, or 0.83%, or 0.0083, into the formula as the rate.
Nper is the total number of payment periods in an annuity. For example, if you get a four-year car loan and make monthly payments, your loan has
4*12 (or 48) periods. You would enter 48 into the formula for nper.
Pmt is the payment made each period and cannot change over the life of the annuity. Typically, pmt includes principal and interest but no other fees
or taxes. For example, the monthly payments on a $10,000, four-year car loan at 12 percent are $263.33. You would enter -263.33 into the formula as
the pmt. If pmt is omitted, you must include the fv argument.
Pv is the present value, or the lump-sum amount that a series of future payments is worth right now. If pv is omitted, it is assumed to be 0 (zero), and
you must include the pmt argument.
Fv is the future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (the future value of a
loan, for example, is 0). For example, if you want to save $50,000 to pay for a special project in 18 years, then $50,000 is the future value. You could
then make a conservative guess at an interest rate and determine how much you must save each month. If fv is omitted, you must include the pmt
argument.
Type is the number 0 or 1 and indicates when payments are due.
Set type equal to If payments are due
0 or omitted At the end of the period
1 At the beginning of the period
Guess is your guess for what the rate will be. (Only used in RATE( )