## Explanation

Loans have four primary components: the amount, the interest rate, the number of periodic payments (the loan term) and a payment amount per period. One use of the PV function is to calculate the the original loan amount, when given the other 3 components.

For this example, we want to find the original amount of a loan with a 4.5% interest rate, and a payment of $93.22, and a term of 60 months. The PV function is configured as follows:

**rate** - The interest rate per period. We divide the value in C5 by 12 since 4.5% represents annual interest:

```
C5/12
```

**nper** - the number of periods comes from cell C7, 60 monthly periods in a 5 year loan.

**pmt** - The payment made each period. This is the known amount $93.22, which comes from cell C6. By convention, payments in PV are input as negative values.

With these inputs, the PV function returns 5,000.226, which is displayed as $5000 using number formatting. The actual loan amount is $5000 even, but the monthly payment is rounded to the nearest penny causes FV to return a slightly different result.