Question

Type an equal sign (=) followed by the function name PMT and an open parenthesis ((). Define the
arguments of the function as follows:
 Rate: Click cell B3, type a forward slash (/) for division, type the number 12, and type a comma. Since we
are calculating monthly payments, the annual interest rate must be converted to a monthly interest
rate.
 Nper: Click cell C3, type an asterisk (*) for multiplication, type the number 12, and type a comma. Similar
to the Rate argument, the terms of the lease must be converted to months since we are calculating
monthly payments.
 Pv: Type a minus sign (−), click cell D3, and type a comma. Remember that this argument must always be
preceded by a minus sign.
 Fv: Click cell E3 and type a comma.
 Type: Type the number 1, type a closing parenthesis ()), and press the ENTER key. We will assume the
lease payments will be made at the beginning of each month, which requires that this argument be
defined with a value of 1.

Answer 1

Rate	This is interest rate the lender is charging the borrower. Divide this rate by 12 if calculating monthly payments.
Nper	This is termed as number of periods. Since usually quoted in years, so multiply the years by 12 if calculating monthly payments.
Pv	This stands for present value. This is the principal of the loan or the amount of money that is borrowed. a minus sign must precede the cell location or value.
[Fv]	This stand for future value. It is not always necessary to define it. It is used if there is a lump-sum payment that will be made at the end of the loan terms. If undefined, Excel will assume it as zero.
[Type]	This argument can be defined as either a 1 or a 0. The number 1 is used if payments are made at the beginning of each period. A 0 is used if payments are made at the end of each period.