What is PPMT function in Excel?
PPMT function is one of the Financial functions in Microsoft Excel that returns the payment on the principal for a given period for an investment based on periodic, constant payments and a constant interest rate.
Syntax of PPMT function
PPMT(rate, per, nper, pv, [fv], [type])
The PPMT function syntax has the following arguments:
- Rate: The interest rate per period.
- Per: Specifies the period and must be in the range 1 to nper.
- Nper: The total number of payment periods in an annuity.
- Pv: The present value — the total amount that a series of future payments is worth now.
- Fv(Optional): The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (zero), that is, the future value of a loan is 0.
- Type(Optional): The number 0 or 1 and indicates when payments are due.
|Set type equal to||If payments are due|
|0 or omitted||At the end of the period|
|1||At the beginning of the period|
PPMT formula explanation
Make sure that you are consistent about the units you use for specifying rate and nper. If you make monthly payments on a four-year loan at 12 percent annual interest, use 12%/12 for rate and 4*12 for nper. If you make annual payments on the same loan, use 12% for rate and 4 for nper.
Examples of PPMT function
Steps to follow:
1. Open a new Excel worksheet.
2. Copy data in the following table below and paste it in cell A1
Note: For formulas to show results, select them, press F2 key on your keyboard and then press Enter.
You can adjust the column widths to see all the data, if need be.
|10%||Annual interest rate|
|2||Number of years for the loan|
|$2,000.00||Amount of loan|
|=PPMT(A2/12, 1, A3*12, A4)||Principal payment for month 1 of the loan||($75.62)|
|8%||Annual interest rate|
|10||Number of years for the loan|
|$200,000.00||Amount of loan|
|Formula||Description (Result)||Live Result|
|=PPMT(A11, A12, 10, A13)||Principal payment for year 10 of the loan||($27,598.05)|