Financial Formulas
PV = (PMT / i) * [1 - 1 / (1 + i)n]
PV = Present Value
PMT = Payment Per Period*
i = Periodic interest rate*
n = number of periods*
This is the basic formula for determining the Present Value of money and payment information for annuities. A little algebra yields monthly payment information:
PMT = [PV * i * (1+i)n] / [(1+i)n - 1]
* For most financial purposes, we are usually interested in monthly information. Information expressed in yearly format, such number of years and Annual Percentage Rate (APR), must be converted to monthly information before solving the formula. The number of years is therefore multiplied by 12, e.g, a 5 year loan has 5 x 12 = 60 periods. For the purposes of this loan calculator, the APR is assumed to be based on monthly compounding of interest, e.g., an 8% APR's monthly rate is [1 + (8 * .01)]^(1/12)-1 = 0.64%. Some loans may be structured to compound daily, in which case this calculator will not be accurate.