Excel 2000 in a Nutshell

Name

PV

Synopsis

Use PV (an Analysis ToolPak function) to determine the present value of an investment. This function is used with both loans and investments, such as a savings account. This function is used only with investments that have both constant payments and a constant interest rate.

To Calculate

=PV(Rate, Nper, Pmt, FV, Type)

You must specify a value for either the Pmt or FV arguments, but you do not have to specify both. The Type argument is optional, but the Rate and Nper arguments must have values.

Rate

Indicates the interest rate used to calculate the rate for each period. For example, if you make monthly payments and the interest rate is 12% you need to specify an interest rate of 0.01 (0.12/12) for each month.

Pmt

Indicates payment that is made for each period. For example, if you are making monthly payments of $355, that is the value of the Pmt argument. The value of this argument should be negative if the amounts are paid out, such as a loan or deposit in an account. If the payment is received, such as dividend checks, this argument should have a positive value. If you do not specify a value for the Pmt argument you must specify a value for the FV argument.

Example

The FV function covered in this chapter has an example illustrating how PV is used to determine the present value of an investment if you know the annual interest rate, number of payments, and the payment amount for each payment period. In the example, the payments were made monthly, so the annual interest ...