## You are learning Functions and Formulas in MS Excel

How can I calculate loan payments with the PMT function?

You can calculate loan payments with the PMT function in Excel by following these steps:

1. Identify the Arguments: The PMT function requires four arguments:

- Rate: This is the interest rate for the loan, expressed as a decimal. For example, if your interest rate is 5%, you would enter 5% / 12 (assuming monthly payments) or 0.05/12.

- Nper: This is the total number of payment periods for the loan. If you have a 30-year loan with monthly payments, nper would be 30 * 12 (total months).

- Pv: This is the present value of the loan, which is the total amount you borrow.

- [Fv]: This argument is optional and specifies the future value, or the balance you want remaining after the final payment (usually 0 for a loan).

2. Write the Formula: In an empty cell, type the following formula, replacing the bracketed values with your specific loan information:

```excel

=PMT(rate, nper, pv, [fv])

```

3. Enter Loan Details: Replace the bracketed values with your actual loan details:

- Substitute `rate` with your interest rate as a decimal divided by the number of payment periods per year (e.g., monthly rate for a yearly rate).

- Substitute `nper` with the total number of payments (e.g., total months for a monthly payment loan).

- Substitute `pv` with the loan amount you borrow.

- Leave `fv` blank or set it to 0 (assuming you want the loan balance to be zero at the end).

4. Press Enter: Once you've entered the formula with your specific values, press Enter. Excel will calculate your monthly loan payment and display the result in that cell.

Example:

Let's say you borrow $10,000 for a 5-year car loan with a 3% annual interest rate. You want to know the monthly payment amount.

Formula:

```excel

=PMT(0.03/12, 5*12, 10000)

```

Explanation:

- Interest rate per month: 3% / 12 = 0.03 / 12

- Total number of payments: 5 years * 12 months/year = 60 months

- Loan amount: $10,000

Result:

By pressing Enter, Excel will display the monthly loan payment, which will be around $177.08.

Note: The PMT function assumes equal monthly payments. It doesn't account for additional fees or variable interest rates.