Payment (PMT) is a regular payment into or out of a financial stream over a period of time.
Payments calculate through a financial formula used to determine the time value of money.
- PV or “Present Value” is the value of the starting sum or initial investment.
- FV or “Future Value” is the value of the final amount.
- r or “Rate” is the rate used per compounding period.
- n or “Number of Periods” is the number of periods of compounding (and payments) that occur.
- b or “Rate if Payments at the Beginning” if the payments occur at the end of each period, “b” = 0. If the payments occur at the beginning of each period, “b” = “r”.
- PMT or “Payment” is the regular payment each compounding period.
What payment is needed to get from a present value of $1000 to a future value of $2000 using a rate of return of 2.2% over 10 periods? Payments are at the begining of each compounding period.
- Wikipedia – Time Value of Money – Wikipedia’s entry on the founding principles behind time value of money, including calculating a payment.
- getobjects.com (archived via archive.org) – Time Value of Money (TVM) Formulas – A collection of time value of money formulas. Includes formulas for other calculations such as number of periods and rate of return as well.