Manuals/calci/PV

PV(r,np,pmt,fv,ty)

Description

This function gives the present value for an investment.
It is based on an interest rate and a constant payment schedule.
This function calculates the present value of an investment, which is the total amount that a series of future payments is worth presently.
In $PV(r,np,pmt,fv,ty)$ , $r$ is the rate of interest for the period.
Suppose we are taking a loan for 8 percent annual interest rate and paying the amount in monthly, then the $r$ value is 8%/12.
So we have to enter the $r$ value as 8%/12 or 0.6667% or 0.006667 in to the formula as the rate.
$np$ is the total number of payment periods in an annuity.
$pmt$ is the payment made each period in the annuity.
Normally, the payment is set over the life of the annuity and includes principal plus interest without any other fees.
$fv$ is the future value of an investment or loan (the value you want to achieve at the end of all periods) when we are omitting the value of $fv$ ,then it is assumed to be 0.
$ty$ is the number 0 or 1 which is specifies the time to make a payment during the period.
when we are not giving the value of $ty$ , then it is assumed to be 0.

ty value	Explanation
0	Payments are due at the end of the period
1	Payments are due at the beginning of the period

$PV={\frac {FV*1}{(1+r)^{n}}}$

where $FV$ is the future value, $r$ is the rate of interest, $n$ is the number of periods.
Also the result is coming in a negative sign ,it is indicating the money that we would pay, an outgoing cash flow.
The interest rate is dividing by 12 to get a monthly rate.
The years the money is paid out is multiplied by 12 to get the number of payments.