About this lesson
Sign conventions: why PMT, PV and FV come out negative
Excel's finance functions treat money as cash flows: cash you receive is positive and cash you pay is negative. So a loan you receive (+640,000) gives a negative repayment, =PMT(B2,B3,B1). Put a minus in front, =-PMT(B2,B3,B1), to show it as a positive amount, and give PMT and the loan opposite signs whenever you combine them in FV.
Using Google Sheets? Do this lesson in Sheets.
=PMT(B2,B3,B1)What you'll practise
Audit a client's equipment loan: see why PMT comes back negative, flip it, find the balance still owing with FV, then prove the loan is paid off.
4 steps · 40 points · the cells outlined in gold below
- PMT
- FV
- sign convention
- cash in vs cash out
The data
| A | B | |
|---|---|---|
| 1 | Loan received ($) | $640,000.00 |
| 2 | Annual rate | 7.8% |
| 3 | Years | 6 |
| 4 | ||
| 5 | Repayment, as PMT gives it | |
| 6 | Repayment, positive | |
| 7 | Still owing after 3 years | |
| 8 | Still owing after 6 years |