1. 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))

\$34,092.47

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

2. 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. Re: PV() worksheet function (2002)

Thanks Hans...

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