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PMT Function Question

  1. #1
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    PMT Function Question

    I am trying to calculate the monthly payment of a 12% ANR loan.

    My questions is: what is the correct way to convert the 12% to a monthly rate.

    Most forums state that I should simply take 12% and divide by 12, or =PMT(12%/12,...).

    However, I know you can also find the effective monthly rate by entering =(12%+1)^(1/12)-1.

    Does anyone know which version is correct, as they yield slightly different monthly interest rates. I believe the second version is more precise, but am not certain.

  2. #2
    Forum Expert MickG's Avatar
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    Re: PMT Function Question

    Who Knows !!!
    When I look at a loan example from a particular loan company, I can deduce by the repayments that they use the (1+INT) ^(1/12), but as you are aware the PMT function uses (Int/12)
    I look forward to someone enligthening both of us.
    Regards Mick

  3. #3
    Forum Expert
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    Re: PMT Function Question

    ANR? I hadn't heard of it and could not find a match on Google or on acronym finders. What does it stand for?

    Pauley

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