Business Tips Tricks and Enhancement
The PPMT function uses the following syntax; you’ll note that most of the arguments are the same as for the PMT function:
PMT(rate, per, nper, prin, [fv, type])
The first four arguments are required. They are
rate is the interest rate for the loan.
per is the period for which you want the principal payment. This argument must be in the range 1 to nper.
nper is the term of the loan expressed as the number of payment periods.
prin is the principal, the amount you are borrowing.
As explained earlier for the PMT function, both rate and nper must use the same time unit (usually months). The last two arguments are optional (as indicated by the brackets in the formula):
fv is the future value of the loan, or the amount still owed when you have completed payments. Because loans are almost always paid off in full, you will use 0 for this argument or omit it, in which case Excel assumes 0.
type indicates when payments are made. Use a value of 1 if payments are made at the start of each period. Use a value of 0, or omit the argument, if the payment is made at the end of each period.
In most situations you omit both of these optional arguments.
To try out the PPMT function, you can add to the worksheet you created earlier for the PMT function (refer to Figure 3.1). Then follow these steps:
A sample calculation is shown in Figure 3.3. You can see that for the specified loan, the first payment consists of $232.29 going toward principal and $73.33 going toward interest. Change the payment number to 60—the last payment for the loan—and you’ll see the amounts change to $304.22 and $1.39 respectively.
Taken From : Manage Your Money and Investments with Microsoft Excel
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