This chapter will be going through a number of financial functions, so we will be using one example for most of them.
We will assume that we have taken a loan of 80,000 Euros, paid back monthly, with a 6% annual interest rate, and we need it to be paid off in 15 years.
Firstly, we will be taking a look at how to find the amount that must be paid each month, in order for the loan to be paid off in exactly 15 years. This will be done using the PMT function.
We’ll write Equal, PMT (which is short for Payment), select our rate, the number of periods (known as NPER), the amount of our initial loan (known as the Present Value), and if we would like, our future value, which is how much want to be in debt by the end of the 15 years. We may also add whether we want to pay the amount at the start or end of each period, but we will leave it be for now, meaning that it is paid at the end.
We are shown that we need to pay 675 Euros and 9 cents per month. Changing any of the other values will now change the Payment amount.
In this lesson we have gone through how to find the payment amount per period for paying back a loan.
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