Which Excel function is commonly used to calculate loan repayment instalments?

The PMT function is used to calculate loan repayment instalments in Excel.

The PMT function computes the periodic payment amount for a loan based on constant payments and a constant interest rate.

The syntax is: PMT(rate, nper, pv, [fv], [type])

where:

• rate = interest rate per period
• nper = total number of payment periods
• pv = present value (the loan amount)
• fv = future value (optional, typically 0 for loans)
• type = timing of payment (optional)

For example, if you borrow ₹5,00,000 at 10% annual interest for 5 years with monthly payments:

• rate = 10%/12 = 0.833% per month
• nper = 5 × 12 = 60 months
• pv = -5,00,000 (negative because it's money borrowed)

The formula would be: =PMT(10%/12, 60, -500000)

The other options are:

• DB: Calculates depreciation using declining balance method
• SLN: Calculates straight-line depreciation
• PV: Calculates present value of future cash flows (opposite of what we need for loan payments)