PV to get Present Value of a Loan

We are going to pay our (EMI) Equal Monthly Installments for our car loan. The agent is offering an EMI of $2000 which is at a 10% interest rate for a period of 5 years against a loan. What is the loan amount ? We can find out our loan amount by using PV functions which gives Present Value of future periodic cash outflows. This amount we can compare with our offer Loan amount and find out the best deal. Here are the Input data.

10% is the annual interest rate
5 is the number of years, this equal to 12x5 = 60 months
$2000 is the EMI ( Equal Monthly Installments ) we will be paying

PV(rate,nper,pmt,fv,type)

Rate=Interest Rate,
Nper=Number of Installments
Pmt= Our EMI or amount we pay in each Installment
Let us use our financial function by using an Excel spread sheet.
Pv=Future value, taken as 0 if omitted.
Type= 0 if payment is at the end of the period ( or omitted ) , 1 if it is at start.

Excel Spread Sheet

The Excel worksheet

	A	B	C	D
1	10%	Annual Interest Rate
2	5	Number of Years
3	2000	EMI (Monthly Installment)
4	94,915

Here is out final Loan Amount equal to 94.915
The formula we have entered at cell A4 is =PV(A1/12,A2*12,A3, ,1)

We have 10% as annual interest in the cell A1 so we have to divide it by 12 to get monthly interest. So in our formula for PMT we have used A1/12. Similarly we have used 5 years at cell A2 so we have to multiply it by 12 to get 24 monthly installments. So we have to use A2*12 in our formula for PMT.

So we get our Loan Amount, this value we can check and decide the best offer. By changing the EMI we can findout the final loan amount.

Financial Functions to use in MS Excel spread sheet
PMT: Getting Equal Monthly Installments PV: Getting the Loan amount from fixed EMI

Post Comment This is for short comments only. Use the forum for more discussions.
Name
Email	( not to be displayed)Privacy Policy
1+2=	This is to prevent automatic submission by spammers. Please enter the result of the sum as asked