Equation behind the Function

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Guest

Good Day,

How do I get to see the equation behind Excel Functions? For instance, the
result of pmt() is not making sense to me, I'd like to see what this function
is doing and how it is calculating its value. Trial and Error is rather
time-consuming and tedious. What is the better way of doing this? Thnx for
the help.
 
Use help to find the description for the PMT function.
The result should be right because lots of people use it every day.
However, the function may have some limitations. You need to read its help
descritpion.
Pay attention to the TYPE parameter.

--
Best regards,
---
Yongjun CHEN
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You cannot see the specific workings for your own calculation, but you
CAN get the full help on Excel functions by using the online help -
press F1 to access it - for the specific function, help gives:-

PMT
See Also

Calculates the payment for a loan based on constant payments and a
constant interest rate.

Syntax

PMT(rate,nper,pv,fv,type)

For a more complete description of the arguments in PMT, see the PV
function.

Rate is the interest rate for the loan.

Nper is the total number of payments for the loan.

Pv is the present value, or the total amount that a series of future
payments is worth now; also known as the principal.

Fv is 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 is the number 0 (zero) or 1 and indicates when payments are due.

Set type equal to If payments are due
0 or omitted At the end of the period
1 At the beginning of the period

Remarks
The payment returned by PMT includes principal and interest but no
taxes, reserve payments, or fees sometimes associated with loans.
Make sure that you are consistent about the units you use for
specifying rate and nper. If you make monthly payments on a four-year
loan at an annual interest rate of 12 percent, use 12%/12 for rate and
4*12 for nper. If you make annual payments on the same loan, use 12
percent for rate and 4 for nper.
Tip

To find the total amount paid over the duration of the loan, multiply
the returned PMT value by nper.

Example 1

The example may be easier to understand if you copy it to a blank
worksheet.

How?

Create a blank workbook or worksheet.
Select the example in the Help topic. Do not select the row or column
headers.


Selecting an example from Help

Press CTRL+C.
In the worksheet, select cell A1, and press CTRL+V.
To switch between viewing the results and viewing the formulas that
return the results, press CTRL+` (grave accent), or on the Tools menu,
point to Formula Auditing, and then click Formula Auditing Mode.


1
2
3
4
A B
Data Description
8% Annual interest rate
10 Number of months of payments
10000 Amount of loan
Formula Description (Result)
=PMT(A2/12, A3, A4) Monthly payment for a loan with the above terms
(-1,037.03)
=PMT(A2/12, A3, A4, 0, 1) Monthly payment for a loan with the above
terms, except payments are due at the beginning of the period
(-1,030.16)


Example 2

You can use PMT to determine payments to annuities other than loans.

The example may be easier to understand if you copy it to a blank
worksheet.

How?

Create a blank workbook or worksheet.
Select the example in the Help topic. Do not select the row or column
headers.


Selecting an example from Help

Press CTRL+C.
In the worksheet, select cell A1, and press CTRL+V.
To switch between viewing the results and viewing the formulas that
return the results, press CTRL+` (grave accent), or on the Tools menu,
point to Formula Auditing, and then click Formula Auditing Mode.


1
2
3
4
A B
Data Description
6% Annual interest rate
18 Years you plan on saving
50,000 Amount you want to have save in 18 years
Formula Description (Result)
=PMT(A2/12, A3*12, 0, A4) Amount to save each month to have 50,000 at
the end of 18 years (-129.08)


Note The interest rate is divided by 12 to get a monthly rate. The
number of years the money is paid out is multiplied by 12 to get the
number of payments.
 
Many Thanks for the suggestions as well as the offer to help with the
specific equation. Nonetheless, it is not just pmt, I would very much like to
have a better undertanding of the whole issue. Does Microsoft publish such
information somewhere?
 
Yes, they do. As you've been told, it's in Help. It's actually pretty
straightforward. What is it about the formula in Help that you don't understand?
 
Have we gotten so far away from "real math" that we forget that Excel's
functions are not math, but are actually doing the math for us?

The Excel help documentation explains how to use the PMT function, not the
mathematics behind that function. Back when Excel 4 came out...in a
box....with 10 disks....and with books...there was a functions book that
included all of the math used to derive each function's results.

In the case of the PMT function, that documentation went something like this:
---------------------

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e., interest
periods per year * number of years)
---------------------

I believe that's what the OP was hoping to find.

I haven't seen that kind of function documentation for Excel in quite some
time.
***********
Regards,
Ron

XL2002, WinXP
 
Thank you Ron! That is exactly what I wish to see: the "real math" behind the
equations and not just how to use them.

How can I get a hold of that "functions book for Excel 4"? I presume there
no longer are such functions books for newer Excel versions? Once again, many
thanks.


Ron Coderre said:
Have we gotten so far away from "real math" that we forget that Excel's
functions are not math, but are actually doing the math for us?

The Excel help documentation explains how to use the PMT function, not the
mathematics behind that function. Back when Excel 4 came out...in a
box....with 10 disks....and with books...there was a functions book that
included all of the math used to derive each function's results.

In the case of the PMT function, that documentation went something like this:
---------------------

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e., interest
periods per year * number of years)
---------------------

I believe that's what the OP was hoping to find.

I haven't seen that kind of function documentation for Excel in quite some
time.
***********
Regards,
Ron

XL2002, WinXP


Fred Smith said:
Yes, they do. As you've been told, it's in Help. It's actually pretty
straightforward. What is it about the formula in Help that you don't understand?
Click to expand...
Click to expand...
 
Try eBay

I couldn't find the documentation anywhere else

***********
Regards,
Ron

XL2002, WinXP


ai18ma said:
Thank you Ron! That is exactly what I wish to see: the "real math" behind the
equations and not just how to use them.

How can I get a hold of that "functions book for Excel 4"? I presume there
no longer are such functions books for newer Excel versions? Once again, many
thanks.


Ron Coderre said:
Have we gotten so far away from "real math" that we forget that Excel's
functions are not math, but are actually doing the math for us?

The Excel help documentation explains how to use the PMT function, not the
mathematics behind that function. Back when Excel 4 came out...in a
box....with 10 disks....and with books...there was a functions book that
included all of the math used to derive each function's results.

In the case of the PMT function, that documentation went something like this:
---------------------

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e., interest
periods per year * number of years)
---------------------

I believe that's what the OP was hoping to find.

I haven't seen that kind of function documentation for Excel in quite some
time.
***********
Regards,
Ron

XL2002, WinXP


Fred Smith said:
Yes, they do. As you've been told, it's in Help. It's actually pretty
straightforward. What is it about the formula in Help that you don't understand?

--
Regards,
Fred


Many Thanks for the suggestions as well as the offer to help with the
specific equation. Nonetheless, it is not just pmt, I would very much like to
have a better undertanding of the whole issue. Does Microsoft publish such
information somewhere?

:

Good Day,

How do I get to see the equation behind Excel Functions? For instance, the
result of pmt() is not making sense to me, I'd like to see what this function
is doing and how it is calculating its value. Trial and Error is rather
time-consuming and tedious. What is the better way of doing this? Thnx for
the help.
Click to expand...
Click to expand...
Click to expand...
 
See Excel's Help for the "PV worksheet function" topic.

- Mike

Ron Coderre said:
Try eBay

I couldn't find the documentation anywhere else

***********
Regards,
Ron

XL2002, WinXP


ai18ma said:
Thank you Ron! That is exactly what I wish to see: the "real math" behind
the
equations and not just how to use them.

How can I get a hold of that "functions book for Excel 4"? I presume
there
no longer are such functions books for newer Excel versions? Once again,
many
thanks.


Ron Coderre said:
Have we gotten so far away from "real math" that we forget that Excel's
functions are not math, but are actually doing the math for us?

The Excel help documentation explains how to use the PMT function, not
the
mathematics behind that function. Back when Excel 4 came out...in a
box....with 10 disks....and with books...there was a functions book
that
included all of the math used to derive each function's results.

In the case of the PMT function, that documentation went something like
this:
---------------------

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e., interest
periods per year * number of years)
---------------------

I believe that's what the OP was hoping to find.

I haven't seen that kind of function documentation for Excel in quite
some
time.
***********
Regards,
Ron

XL2002, WinXP


:

Yes, they do. As you've been told, it's in Help. It's actually pretty
straightforward. What is it about the formula in Help that you don't
understand?

--
Regards,
Fred


Many Thanks for the suggestions as well as the offer to help with
the
specific equation. Nonetheless, it is not just pmt, I would very
much like to
have a better undertanding of the whole issue. Does Microsoft
publish such
information somewhere?

:

Good Day,

How do I get to see the equation behind Excel Functions? For
instance, the
result of pmt() is not making sense to me, I'd like to see what
this function
is doing and how it is calculating its value. Trial and Error is
rather
time-consuming and tedious. What is the better way of doing this?
Thnx for
the help.
Click to expand...
Click to expand...
Click to expand...
 
Yes...there are some mathematical equations for some of the functions, like
the PV function. But, what about the PMT function that the OP mentioned in
the first post? or the FV function? or so many more?

Again, as I recall, the Excel 4 documention displayed the math behind many
more functions.

***********
Regards,
Ron

XL2002, WinXP


Mike Middleton said:
See Excel's Help for the "PV worksheet function" topic.

- Mike

Ron Coderre said:
Try eBay

I couldn't find the documentation anywhere else

***********
Regards,
Ron

XL2002, WinXP


ai18ma said:
Thank you Ron! That is exactly what I wish to see: the "real math" behind
the
equations and not just how to use them.

How can I get a hold of that "functions book for Excel 4"? I presume
there
no longer are such functions books for newer Excel versions? Once again,
many
thanks.


:

Have we gotten so far away from "real math" that we forget that Excel's
functions are not math, but are actually doing the math for us?

The Excel help documentation explains how to use the PMT function, not
the
mathematics behind that function. Back when Excel 4 came out...in a
box....with 10 disks....and with books...there was a functions book
that
included all of the math used to derive each function's results.

In the case of the PMT function, that documentation went something like
this:
---------------------

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e., interest
periods per year * number of years)
---------------------

I believe that's what the OP was hoping to find.

I haven't seen that kind of function documentation for Excel in quite
some
time.
***********
Regards,
Ron

XL2002, WinXP


:

Yes, they do. As you've been told, it's in Help. It's actually pretty
straightforward. What is it about the formula in Help that you don't
understand?

--
Regards,
Fred


Many Thanks for the suggestions as well as the offer to help with
the
specific equation. Nonetheless, it is not just pmt, I would very
much like to
have a better undertanding of the whole issue. Does Microsoft
publish such
information somewhere?

:

Good Day,

How do I get to see the equation behind Excel Functions? For
instance, the
result of pmt() is not making sense to me, I'd like to see what
this function
is doing and how it is calculating its value. Trial and Error is
rather
time-consuming and tedious. What is the better way of doing this?
Thnx for
the help.
Click to expand...
Click to expand...
Click to expand...
 
Ron -

The mathematical equation is in the PV worksheet function Help topic.

The equation includes PV, RATE, NPER, and FV, with the explanation that
Excel "solves for one financial argument in terms of the others."

The Help topics for Excel 2003 seem to be essentially the same as the topics
in my copy of the Function Reference paperback for Excel 4.

- Mike

Ron Coderre said:
Yes...there are some mathematical equations for some of the functions,
like
the PV function. But, what about the PMT function that the OP mentioned in
the first post? or the FV function? or so many more?

Again, as I recall, the Excel 4 documention displayed the math behind many
more functions.

***********
Regards,
Ron

XL2002, WinXP


Mike Middleton said:
See Excel's Help for the "PV worksheet function" topic.

- Mike

Ron Coderre said:
Try eBay

I couldn't find the documentation anywhere else

***********
Regards,
Ron

XL2002, WinXP


:

Thank you Ron! That is exactly what I wish to see: the "real math"
behind
the
equations and not just how to use them.

How can I get a hold of that "functions book for Excel 4"? I presume
there
no longer are such functions books for newer Excel versions? Once
again,
many
thanks.


:

Have we gotten so far away from "real math" that we forget that
Excel's
functions are not math, but are actually doing the math for us?

The Excel help documentation explains how to use the PMT function,
not
the
mathematics behind that function. Back when Excel 4 came out...in a
box....with 10 disks....and with books...there was a functions book
that
included all of the math used to derive each function's results.

In the case of the PMT function, that documentation went something
like
this:
---------------------

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e.,
interest
periods per year * number of years)
---------------------

I believe that's what the OP was hoping to find.

I haven't seen that kind of function documentation for Excel in
quite
some
time.
***********
Regards,
Ron

XL2002, WinXP


:

Yes, they do. As you've been told, it's in Help. It's actually
pretty
straightforward. What is it about the formula in Help that you
don't
understand?

--
Regards,
Fred


Many Thanks for the suggestions as well as the offer to help
with
the
specific equation. Nonetheless, it is not just pmt, I would very
much like to
have a better undertanding of the whole issue. Does Microsoft
publish such
information somewhere?

:

Good Day,

How do I get to see the equation behind Excel Functions? For
instance, the
result of pmt() is not making sense to me, I'd like to see what
this function
is doing and how it is calculating its value. Trial and Error
is
rather
time-consuming and tedious. What is the better way of doing
this?
Thnx for
the help.
Click to expand...
Click to expand...
Click to expand...
 
Thanks for clearing that up, Mike.

When spreadsheet programs first came out, I recall running the equations in
the documentation through my HP12c calculator to verify results. (I sure
don't miss those days) Maybe it was 1-2-3's documentation.

The PV function in Excel Help only shows the one equation, though, and the
other related functions refer to the PV page. I suppose that for someone with
the appropriate math skills, solving for any individual component shouldn't
be too difficult.

***********
Regards,
Ron

XL2002, WinXP


Mike Middleton said:
Ron -

The mathematical equation is in the PV worksheet function Help topic.

The equation includes PV, RATE, NPER, and FV, with the explanation that
Excel "solves for one financial argument in terms of the others."

The Help topics for Excel 2003 seem to be essentially the same as the topics
in my copy of the Function Reference paperback for Excel 4.

- Mike

Ron Coderre said:
Yes...there are some mathematical equations for some of the functions,
like
the PV function. But, what about the PMT function that the OP mentioned in
the first post? or the FV function? or so many more?

Again, as I recall, the Excel 4 documention displayed the math behind many
more functions.

***********
Regards,
Ron

XL2002, WinXP


Mike Middleton said:
See Excel's Help for the "PV worksheet function" topic.

- Mike

Try eBay

I couldn't find the documentation anywhere else

***********
Regards,
Ron

XL2002, WinXP


:

Thank you Ron! That is exactly what I wish to see: the "real math"
behind
the
equations and not just how to use them.

How can I get a hold of that "functions book for Excel 4"? I presume
there
no longer are such functions books for newer Excel versions? Once
again,
many
thanks.


:

Have we gotten so far away from "real math" that we forget that
Excel's
functions are not math, but are actually doing the math for us?

The Excel help documentation explains how to use the PMT function,
not
the
mathematics behind that function. Back when Excel 4 came out...in a
box....with 10 disks....and with books...there was a functions book
that
included all of the math used to derive each function's results.

In the case of the PMT function, that documentation went something
like
this:
---------------------

P = (Pv*R) / [1 - (1 + R)^(-n)]

where

Pv = Present Value (beginning value or amount of loan)
APR = Annual Percentage Rate (one year time period)
R = Periodic Interest Rate = APR/ # of interest periods per year
P = Monthly Payment
n = # of interest periods for overall time period (i.e.,
interest
periods per year * number of years)
---------------------

I believe that's what the OP was hoping to find.

I haven't seen that kind of function documentation for Excel in
quite
some
time.
***********
Regards,
Ron

XL2002, WinXP


:

Yes, they do. As you've been told, it's in Help. It's actually
pretty
straightforward. What is it about the formula in Help that you
don't
understand?

--
Regards,
Fred


Many Thanks for the suggestions as well as the offer to help
with
the
specific equation. Nonetheless, it is not just pmt, I would very
much like to
have a better undertanding of the whole issue. Does Microsoft
publish such
information somewhere?

:

Good Day,

How do I get to see the equation behind Excel Functions? For
instance, the
result of pmt() is not making sense to me, I'd like to see what
this function
is doing and how it is calculating its value. Trial and Error
is
rather
time-consuming and tedious. What is the better way of doing
this?
Thnx for
the help.
Click to expand...
Click to expand...
Click to expand...
 
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