## You are learning Functions and Formulas in MS Excel

What is the PMT function used for?

The PMT function in Excel is used to calculate the periodic payment for a loan or mortgage based on constant interest rate, number of payments, and present value (loan amount).

Here's a breakdown:

* What it calculates: The PMT function determines the fixed monthly, quarterly, or yearly payment you need to make to repay a loan over a specific period, considering both principal and interest.

* What it considers:

* Interest rate: The annual interest rate charged on the loan (needs to be converted to the payment period's frequency if payments are monthly or quarterly).

* Number of payments (nper): The total number of payments required to repay the loan.

* Present value (pv): The initial loan amount you borrow.

Example:

Let's say you take out a car loan of $20,000 (present value) with an annual interest rate of 5%. You plan to repay the loan in 4 years (total of 48 monthly payments). You can use the PMT function to find your monthly payment amount:

```excel

=PMT(5%/12, 48, 20000)

```

- 5%/12: Converts the annual interest rate (5%) to a monthly rate (0.4167%).

- 48: The total number of monthly payments (4 years * 12 months/year).

- 20000: The loan amount (present value).

This formula would give you a result around $436.82, which would be your estimated monthly payment for the car loan.

Note: The PMT function assumes equal payments throughout the loan term and doesn't factor in additional fees or taxes associated with the loan.