Topic: PMT And Rate

Student Name: Samiksha Johnson and Deenis

Johnson
Date: 13 October 2023
Class: BBA (2021-24)
Section: B
Subject Faculty: Dr. Varsha Bansal Goyal
Subject Code: BBA313
 Contents of the Presentation

1. Introduction to excel
2. PMT
3. PMT Question
4. Rate
5. Rate Question
6. Conclusion

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 Introduction to Excel

• Microsoft Excel is a powerful spreadsheet software developed by Microsoft.

• It is widely used for tasks such as data entry, analysis, and visualization. Excel
organizes data into cells, rows, and columns, making it an excellent tool for
managing and manipulating numerical information.
• Users can create formulas and functions for calculations, generate charts and graphs
for data visualization, and perform various data analysis tasks.
• Excel is an essential tool in business, finance, education, and many other fields,
offering the capability to handle a wide range of data-related tasks efficiently.

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PMT
• In Excel, "PMT" stands for "Payment." It denotes the periodical payment
required to pay off for a particular period of time with a constant interest rate.
• It is commonly used for scenarios like calculating monthly mortgage payments,
car loan installments, or regular contributions to savings accounts.
• Formula :-

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PMT function requires three essential inputs:
• Rate -The interest rate for the loan.
• Nper-The total number of payments for the loan.
• PV-The present value, or the total amount that a series of future payments is worth now; also
known as the principal. This is typically negative value for loans and positive value
for investments.
Additionally, you can provide optional inputs like the future value(FV) or the payment type (type)
if you scenario requires them.
• FV -The future value, or a cash balance you want to attain after the last payment is made. If fv is
omitted, it is assumed to be 0 (zero), that is, the future value of a loan is 0.
• Type -The number 0 (zero) or 1 and indicates when payments are due.

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Question
1. Suppose the loan amount is 25,000, the interest rate is 10% annual, and the period
is 5 years. Calculate monthly payment amount by using PMT function in excel.

Ø STEPS-
• i. Enter the date in the spreadsheet.
• ii. Use the PMT function in the cell.
• iii. Excel will calculate the payment amount

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RATE
• The RATE Function is an Excel Financial function that is used to calculate the
interest rate charged on a loan or the rate of return needed to reach a specified
amount on an investment over a given period.
• The usage of the RATE function in Excel is most common for calculating the
interest rate on a debt instrument, such as a loan or bond.
• Formula-

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Question-
1. Suppose you want to find the interest rate for a loan with 6 Years payments of 200
each, with an initial loan amount of 1000, and no future value and the payment
needs to be done yearly then calculated the interest rate using the RATE function
in Excel.

Ø STEPS-
i. Enter the date in the spreadsheet.
ii. Use the RATE function in the cell.

iii. Excel will calculate the interest rate.

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CONCLUSION
 Excel’s PMT and RATE functions offer indispensable financial tools. PMT calculates periodic
payments, aiding in loan planning and savings goals. RATE helps determine interest rates for
investments and financial decisions. These functions simplify complex financial calculations,
saving time and reducing errors.
 Excel’s versatility and precision make it a must-have for anyone dealing with financial planning
and analysis. Whether it’s managing a mortgage, comparing loans, or evaluating investment
opportunities, Excel empowers users to make informed and strategic financial choices. By
mastering PMT and RATE, you unlock valuable capabilities that enhance your financial literacy
and enable more confident decision-making.

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