The PV function calculates the present value of an investment or the principal value of a loan.
For example, you can use the PV function to calculate the amount you can borrow for a loan, or the amount you need to invest to achieve a financial goal.
PV(Interest rate, Number of periods, Payments, Future value, Payment timing)
|Interest rate (required)||Number||The interest rate per period.|
|Number of periods (required)||Number||The total number of periods.|
|Payments (required)||Number||The amount paid each period.|
|Future value (required)||Number|
The future value of the investment or loan.
For a loan, the future value is 0.
|Payment timing (required)||Number|
Determines whether each payment is made at the start or end of each period. If a payment is made at the start of the period, that period's interest applies to it.
You can enter a value of 0 or 1 for this argument. If you enter:
The PV function returns a number.
For any values you give the PV function via an argument, or that the function returns:
- a positive value represents money you receive, such as a dividend or loan.
- a negative value represents money paid, such as a deposit or interest payment.
You must use the same time periods for the Interest rate, Number of periods, and Payments arguments. For example, an investment might over 3 years. In this case, there are 36 monthly periods, and you should divide the annual interest rate by 12. Additionally, any payment amounts should also be monthly.
In this example, a module has the Mortgages list on columns, and line items on rows. The Interest rate line item uses the Percentage format.
The formula uses the PV function to calculate the amount a customer can borrow for each mortgage. The interest rate is divided by 12 to reflect monthly payments at the end of each period.
|Mortgage 1||Mortgage 2|
|Number of periods||360||300|
Principal loan value
In this example, a module has the Customers list on columns, and line items on rows. The Interest rate line item uses the Percentage format.
The formula uses the PV function to calculate the required investment amount for each customer. For example, if a customer wants to save $50,000 over 10 years at an interest rate of 5%, they need to initially invest $30,358.
|Customer 1||Customer 2|
|Number of periods||120||36|
Present investment value