## Explanation

The PMT function is a financial function that returns the periodic payment for a loan. You can use the PMT function to figure out payments for a loan, given the loan amount, number of periods, and interest rate. An annuity is a series of equal cash flows, spaced equally in time.

The goal in this example is to have 100,000 at the end of 10 years, with an interest rate of 5%. Payments are made annually, at the end of each year. The formula in cell C9 is:

```
=PMT(C6,C7,C4,C5,0)
```

where:

**rate**- from cell C6, 5%.**nper**- from cell C7, 25.**pv**- from cell C4, 0.**fv**- from cell C5, 100000.**type**- 0, payment at end of period (regular annuity).

With this information, the PMT function returns -$7,950.46. The value is negative because it represents a cash outflow.

### Annuity due

With an annuity due, payments are made at the *beginning* of the period, instead of the *end*. To calculate the payment for an annuity due, use 1 for the *type* argument. In the example shown, the formula in C11 is:

```
=PMT(C6,C7,C4,C5,1)
```

which returns -$7,571.86 as the payment amount. Notice the only difference in this formula is type = 1.