What is IPMT function in Excel?
IPMT function is one of the Financial functions in Microsoft Excel that returns the interest payment for a given period for an investment based on periodic, constant payments and a constant interest rate.
Syntax of IPMT function
IPMT(rate, per, nper, pv, [fv], [type])
The IPMT function syntax has the following arguments:
- Rate: The interest rate per period.
- Per: The period for which you want to find the interest and must be in the range 1 to nper.
- Nper: The total number of payment periods in an annuity.
- Pv: The present value, or the lump-sum amount that a series of future payments is worth right now.
- Fv (Optional): The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (the future value of a loan, for example, is 0).
- Type (Optional): The number 0 or 1 and indicates when payments are due. If type is omitted, it is assumed to be 0.
|Set type equal to||If payments are due|
|0||At the end of the period|
|1||At the beginning of the period|
IPMT formula explanation
- Make sure that you are consistent about the units you use for specifying rate and nper. If you make monthly payments on a four-year loan at 12 percent annual interest, use 12%/12 for rate and 4*12 for nper. If you make annual payments on the same loan, use 12% for rate and 4 for nper.
- For all the arguments, cash you pay out, such as deposits to savings, is represented by negative numbers; cash you receive, such as dividend checks, is represented by positive numbers.
Example of IPMT function
Steps to follow:
1. Open a new Excel worksheet.
2. Copy data in the following table below and paste it in cell A1
Note: For formulas to show results, select them, press F2 key on your keyboard and then press Enter.
You can adjust the column widths to see all the data, if need be.
|1||Period for which you want to find the interest paid.|
|3||Years of loan|
|$8,000||Present value of loan|
|=IPMT(A2/12, A3, A4*12, A5)||Interest due in the first month for a loan with the terms in A2:A5.||($66.67)|
|=IPMT(A2, 3, A4, A5)||Interest due in the last year for a loan with the same terms, where payments are made yearly.||($292.45)|