PV FunctionWayne Becker20150903T17:01:11+00:00
The PV function calculates the Present Value of an investment, based on a series of future payments.
Syntax
=PV(rate,nper,[pmt],[fv],[type])
Arguments
Argument 
Description 
rate 
The interest rate, per period 
nper 
The number of periods for the lifetime of the annuity or investment 
[pmt] 
Optional. Specifies the payment per period. If omitted:

• 
the [fv] argument must be supplied 

[fv] 
Optional. Specifies the future value of the annuity, at the end of nper payments. If omitted:

• 
it takes on the default value 0 

[type] 
Optional. Defines whether the payment is made at the start or the end of the period. The [type] argument can have the value 0 or 1, meaning:

0 
– 
the payment is made at the end of the period 

1 
– 
the payment is made at the beginning of the period 
If omitted, the [type] argument takes on the default value of 0, denoting payments made at the end of the period. 

Examples
Example 1
The following spreadsheet shows the PV function used to calculate the present value of an annuity that pays $1,000 per month for a period of 5 years. The interest is 5% per year and each payment is made at the end of the month.

A 
B 
C 
D 
1 
Data 



2 
$1,000 
Periodic payment – monthly 


3 
8% 
Annual interest rate 


4 
20 
Term – years 


5 




6 
Formula 
Result 
Notes 
7 
=PV(A3/12,A4*12,A2) 
$119,554.29 
Present value of an annuity with the terms in A2:A4, [type] omitted defaults to 0 
8 
=PV(A3/12,A4*12,A2,,1) 
$120,351,32 
Present value of an annuity with the terms in A2:A4, payment made at the beginning of the period ([type] = 1) 
Note: In the example:
 the annual interest rate of 8% had to be converted into a monthly rate (=8%/12), and
 the number of years had to be converted into months (=20*12)
 [fv] was not required in either formula
Cash Flow Convention: In line with general cash flow conventions, outgoing payments are represented by negative numbers and incoming payments are represented by positive numbers.
Common Function Error(s)
Problem 
What went wrong 
#VALUE! 
Occurs if any of the supplied arguments are nonnumeric 
Result is much higher or much lower than expected 
Usually occurs due to failure to convert the rate or the nper to months or quarters, i.e.:

months 
= 
12 * years 

monthly rate 
= 
annual rate/12 

quarters 
= 
4 * years 

quarterly rate 
= 
annual rate/4 
