Forum Discussion
Calculate Loan Affordability
Rodrigo_ wrote: ``as @Joe User suggested, the [....] present value formula is as follows``
No. As I suggested, use the PV function (click here). That is:
PV(rate, nper, pmt, fv, type)
I don't know why anyone would use a complicated math formula when such a simple function is readily available.
KdilagSB wrote: ``Knowing [...] the math is helpful``
Then note that Rodrigo_'s math is wrong.
The PV support page (click here) shows the math formula
Solving for PV, the math formula is:
pv = -(pmt*(1 + rate*type)*((1+rate)^nper - 1) / rate + fv) / (1+rate)^nper
Rodrigo_ makes the simplifying assumptions that fv=0 and type=0. But even then, the formula is:
pv = -pmt*((1+rate)^nper - 1) / rate / (1+rate)^nper
Recall that pv and pmt are signed cash flows, and for loans, they should be oppositely signed. Thus, if pv is positive, pmt is negative.
But even if we make the simplifying assumption that pv and pmt are both positive, but pmt should be interpreted as an opposite cash flow, the correct formula is:
pv = pmt*((1+rate)^nper - 1) / rate / (1+rate)^nper