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Excel Video 143 continues our discussion of financial functions in Excel. This time, I’ll introduce the PMT function that will calculate the amount of a periodic (monthly, annual, etc.) payment due on a loan or a lease. The PMT function requires the same type of information as PV did in the last video. I’ll frequently use PMT to calculate how a payment will change if I increase the amount borrowed (present value) by $10,000 or if the interest rate changes by .5%.
The other thing I want to show you in Excel Video 143 is how to include some of the necessary calculations in the function rather than in the main spreadsheet. It’s much easier for users to understand 9% interest than it is for them to figure out of 9%/12 months. By including calculations in the function instead of on the spreadsheet, your spreadsheet becomes much easier to read.