Results 1 to 3 of 3
  1. #1
    2 Star Lounger
    Join Date
    Feb 2003
    Posts
    144
    Thanks
    0
    Thanked 0 Times in 0 Posts

    PV() worksheet function (2002)

    I need to calculate a principal balance for a mortgage based on what I can afford to pay in principal and interest. I wanted to make sure my use of the PV() function is correct, so I’m looking for some advice.

    Example
    6.75% = APR
    15 = year amortization
    $300 = monthly principal and interest payment.

    Formula:
    =ABS(PV(6.75%/12,12*15,300,,1))

    Answer:
    $34,092.47

    I think this is correct, but I wanted a second opinion before I declare victory. Any help is appreciated…

  2. #2
    Plutonium Lounger
    Join Date
    Mar 2002
    Posts
    84,353
    Thanks
    0
    Thanked 29 Times in 29 Posts

    Re: PV() worksheet function (2002)

    Your formula gives a good approximation, but the exact value depends on the way the monthly interest is calculated. For an effective compounded yearly interest of 6.75%, the monthly interest is

    (1+6.75%)^(1/12)-1 ~ 0.00546 or 0.546%, while 6.75% / 12 ~ 0.563%.

    This would result in $34,518.41

    But the way banks compute interest varies, so the result of an Excel formula does not necessarily correspond to reality.

  3. #3
    2 Star Lounger
    Join Date
    Feb 2003
    Posts
    144
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Re: PV() worksheet function (2002)

    Thanks Hans...

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •