Financial Functions
Advanced

PV: how much can I borrow?

Start from the monthly payment you can afford and work back to the loan.

Task:

You can afford 350 a month on a car loan over 5 years at 7% a year. In B5 give the largest loan that payment supports, as a positive figure.

Interactive Spreadsheet

Read about PV

Hints

+5 XPno-hints bonus

Solve it on your own to keep the bonus. Each hint gets one step closer to the formula.

Variations of PV

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The same formula in the other shapes it takes at work.

  1. PV Function

    Calculate the present value of an investment using the PV function.

    Core
    Advanced
  2. PV of a single future amount

    No payments, just one sum later — what is it worth today?

    Advanced
  3. PV: how much can I borrow?

    Start from the monthly payment you can afford and work back to the loan.

    Advanced

The data in this exercise

This is the grid you start with. Cell references in the task — B6, C2 — point at the row numbers and column letters below.

5 rows × 2 columns1 cell you fill in
AB
1Annual rate0.07
2Years5
3Monthly payment350
4
5Maximum loan
What this exercise teachesMay contain the answer

Mixing an annual rate with monthly payments is the most common finance-formula mistake, and it gives an answer that looks plausible and is badly wrong. Convert both to the payment period before calling PV. The result — the borrowing limit — is the number to take to a dealer.