Question about financial calculation PMT

P

Peter Aitken

I want to verify that I am using the PMT function correctly. The situation
is someone who has a sum of money in the bank earning a certain return. They
want to withdraw a fixed amount each month so that at the end of 20 years
the account balance is zero. The figures are:

Initial balance: 200,000
Annual return: 6%
Years: 20

I am using this:

=PMT(.06/12, 20*12, -200000)

Have I got this right? Thanks
 
J

Jerry W. Lewis

Yes, this would apply to a mortgage. Note however that the unrounded
value is 1432.862..., so the lender may want 1432.87 monthly instead of
accumulating a larger final payment.

Your second question would depend on exactly how the interest is charged
relative to the intervening payments, but would be in the ballpark of
=PMT(0.06/26, 20*26, -200000)

Jerry
 
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