How to Use the PV Function in Excel
Welcome to the comprehensive guide on using the “PV” (Present Value) function in Excel and Google Sheets. This function is a fundamental tool in financial analysis for determining the present value of a future series of cash flows. Whether you’re evaluating investments, loans, or planning financial entries, the PV function is essential. In this guide, we’ll examine how it operates and how to apply it within your spreadsheets.
Basic Syntax
The syntax for the PV function is consistent across both Excel and Google Sheets:
=PV(rate, nper, pmt, [fv], [type])- rate: The interest rate per period.
- nper: The total number of payment periods in the investment or loan.
- pmt: The fixed payment amount made each period; this value does not vary throughout the duration of the annuity.
- fv (optional): The future value, or the desired cash balance after the final payment. If this value is omitted, it defaults to 0.
- type (optional): This parameter specifies the timing of the payment: 0 (default) indicates the payment is due at the end of the period, and 1 indicates the payment is due at the beginning of the period.
Example Usage
Let’s clarify the usage of the PV function with a practical example:
| Case | Values |
|---|---|
| Interest Rate | 5% annually |
| Number of Periods | 10 years |
| Payment per Period | -$1000 |
Given the variables, our formula would look like this:
=PV(5%, 10, -1000)This calculation gives us the present value of paying $1000 annually over 10 years at an interest rate of 5%.
Applications
The PV function has diverse applications across financial modeling. These include:
- Assessing the profitability of investment opportunities.
- Evaluating different loan or mortgage repayment scenarios.
- Calculating the present value of expected future cash inputs and outputs.
Learning to use the PV function effectively will enhance your capacity to make informed financial analyses and enable you to handle complex calculations in Excel and Google Sheets effortlessly.
More information: https://support.microsoft.com/en-us/office/pv-function-23879d31-0e02-4321-be01-da16e8168cbd
Other functions
Returns the accrued interest for a security that pays periodic interest
Returns the accrued interest for a security that pays interest at maturity
Returns the depreciation for each accounting period by using a depreciation coefficient
Returns the depreciation for each accounting period
Returns the number of days from the beginning of the coupon period to the settlement date
Returns the number of days in the coupon period that contains the settlement date
Returns the number of days from the settlement date to the next coupon date
Returns the next coupon date after the settlement date
Returns the number of coupons payable between the settlement date and maturity date
Returns the previous coupon date before the settlement date
Returns the cumulative interest paid between two periods
Returns the cumulative principal paid on a loan between two periods
Returns the depreciation of an asset for a specified period by using the fixed-declining balance method
Returns the depreciation of an asset for a specified period by using the double-declining balance method or some other method that you specify
Returns the discount rate for a security
Converts a dollar price, expressed as a fraction, into a dollar price, expressed as a decimal number
Converts a dollar price, expressed as a decimal number, into a dollar price, expressed as a fraction
Returns the annual duration of a security with periodic interest payments
Returns the effective annual interest rate
Returns the future value of an investment
Returns the future value of an initial principal after applying a series of compound interest rates
Returns the interest rate for a fully invested security
Returns the interest payment for an investment for a given period
Returns the internal rate of return for a series of cash flows
Calculates the interest paid during a specific period of an investment
Returns the Macauley modified duration for a security with an assumed par value of $100
Returns the internal rate of return where positive and negative cash flows are financed at different rates
Returns the annual nominal interest rate
Returns the number of periods for an investment
Returns the net present value of an investment based on a series of periodic cash flows and a discount rate
Returns the price per $100 face value of a security with an odd first period
Returns the yield of a security with an odd first period
Returns the price per $100 face value of a security with an odd last period
Returns the yield of a security with an odd last period
Returns the number of periods required by an investment to reach a specified value
Returns the periodic payment for an annuity
Returns the payment on the principal for an investment for a given period
Returns the price per $100 face value of a security that pays periodic interest
Returns the price per $100 face value of a discounted security
Returns the price per $100 face value of a security that pays interest at maturity
Returns the interest rate per period of an annuity
Returns the amount received at maturity for a fully invested security
Returns an equivalent interest rate for the growth of an investment
Returns the straight-line depreciation of an asset for one period
Returns the sum-of-years' digits depreciation of an asset for a specified period
Returns the bond-equivalent yield for a Treasury bill
Returns the price per $100 face value for a Treasury bill
Returns the yield for a Treasury bill
Returns the depreciation of an asset for a specified or partial period by using a declining balance method
Returns the internal rate of return for a schedule of cash flows that is not necessarily periodic
Returns the net present value for a schedule of cash flows that is not necessarily periodic
Returns the yield on a security that pays periodic interest
Returns the annual yield for a discounted security; for example, a Treasury bill
Returns the annual yield of a security that pays interest at maturity