Future Value Formula: Calculate monthly payment with given interest rate & payment periods

Hi,

I have a crack nut. Let's see if anyone can help with that

I would like to calculate the monthly payment that is needed to achieve a future value. Example:

• Interest Rate: 5% per year
• Period in Years: 10 years
• Future Value: 10,000 Euro
• Current Value: 0 Euro

How can I calculate the monthly payment that is needed to achieve the future value of 10,000 Euro?

I figured out that there is a formula in Excel for calculating the future value but not the monthly payment: =FV (rate, nper, pmt, [pv], [type])

I would really appreciate your feedback.

Thank you,

Philip

See the PMT function. Caveats for both the PMT and FV functions (as well as PV and RATE):

1. If you are making monthly payments, "rate" and "nper" must be monthly units. So "rate" is 5%/12 (typically), and "nper" is 10*12.

2. "Pv", "pmt" and "fv" must be signed cash flows; a different sign (plus or minus) for inflows and for outflows.

It does not matter which sign you choose for which direction. For each function, I choose signs (sometimes differently) so that the function returns a positive value.

For PMT, for example, I would choose "pv" to be positive (or zero), so that PMT is positive. Both are inflows. Therefore, "fv" would be negative (outflow). But you might assign the opposite signs. Your choice.


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PS (possible TMI)....

1. PMT might be RMZ (German) or VPM (French) in your use of Excel. See "Excel Functions Translated" at https://www.perfectxl.com/excel-glos...excel-function .

2. Re: "rate" is 5%/12 (typically). If the annual rate is described as a "compounded rate" or a "yield", the monthly rate might be (1+5%)^(1/12) - 1; or equivalently, RATE(12, 0, -1, 1+5%). But beware: the term "compounded monthly" usually means a simple rate applied monthly. It's a "crap shoot" (wild guess).

3. Re: For PMT, for example, I would choose "pv" to be positive. That is for savings and investments. For loans, just the opposite, since "pv" is an inflow and "pmt" and "fv" are outflows.