**What is the** **Excel PV function?**

The **PV** function on Excel is a financial function useful in investment calculations. It is used to get the present value of a series of future payments in today’s pounds/dollars/euros based on the assumption that payments are **periodic** and **constant** and are at a **constant interest rate**. It can also be used to get the original amount of a loan.

**Formula**

**=PV(rate,nper,pmt,[fv],[type])**

**Explanation**

**rate**– This is the interest rate per period.**nper**– total number of payment periods.**pmt**– payment made in each period.**fv**– [optional] The cash balance you want to achieve after the last payment has been made. If omitted,**fv**is assumed to be zero.**type**– [optional] time when payments are due. 0 = at the end of the period, 1 = at the beginning of the period. The default is ‘0’.

This function helps to returns the present value of an investment.

**Example**

How to use the Excel **PV** function to find original loan value

For this example, we would use the **PV function** to find the original amount of a loan that is currently being paid back at an annual interest of 4.5%, a payment period of 60 months and a constant periodic payment of £93.22

The following steps should be taken;

**Open**the spreadsheet containing the parameters and value relating to your loan.

* Figure 1. Table of parameters*

**Click**on the cell where you want the loan amount to be displayed (**C10**).

*Figure 2. Click cell for the final result*

**Insert**the**formula**

into that cell or into the formula bar above.**=PV(C5/12,C6,C7)**

*Here,**C5/12**represents the**rate**(interest rate per period). We divide the value in**C5**(annual interest of 4.50%) by**12**to get the**interest rate per period**.**C6**is our**nper**as the number of periods (**60**) comes from that cell. Our**pmt**is**£**93.22**which is found in cell**C7.*

*Figure 3. Insert formula*

- Press
**Enter**. Your original loan was about £5,000.

*Figure 4. Press Enter for the result*

**Notes**

- A stream of cash flows that includes the same amount of cash outflow (or inflow) for each period is an annuity. A mortgage or a car loan or is an annuity.
- In annuity functions,
**cash that you pay out**, such as a deposit to savings, is denoted by a**negative number**;**cash that you receive**, e.g.**a dividend check**, is represented by a positive number. For example, a £5,000 deposit to the bank would be represented by the argument**–****£****5,000**for pmt if you are the depositor, and by the**argument****£****5,000**for**pmt**if you are the bank. - By convention,
**dividends**are input as**positive**values while**payments**are input as**negative**values in the**PV**function.

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