IPMT Excel Function

IPMT Function in Excel

IPMT function in excel is used to calculate the interest to be paid on a given loan where the interest and periodic payments are constant, this is an inbuilt function in excel and is also a type of financial function, this function calculates the portion of interest for the payment done for a given period.

Syntax

Compulsory Parameters:

Interest rate: An interest rate for the investment.
Period: Period or duration to calculate the interest rate. Here it is always a number between 1 and a number of payments.
Number_payments: Payment is a number of payments in the duration.
PV: PV is present value is used as a value of payments.

Optional Parameters:

[FV]: FV is optional here. It is the future value. If you receive a loan then this is the final payment at the end. It will assume 0 as FV.
[Type]: Type is optional here. It indicates that the payments are due. There are two types of parameters for the type.
0: It is used if payments are due at the end of the period and it automatically defaults.
1: It is used if payments are due at the beginning of the period.

How to use the IPMT Function in Excel? (Examples)

You can download this IPMT Function Excel Template here – IPMT Function Excel Template

Example #1

This first example returns the interest payment for an $8,000 investment that earns 7.5% annually for 2 years. The interest payment is calculated for the 6^th month and payments that are due at the end of each month.

=IPMT(7.5%/12, 6, 2*12, 8000). So, the calculated IPMT value is $40.19

Example #2

This next example returns the interest payment for a $10,000 investment that earns 5% annually for 4 years. The interest payment is calculated for the 30th week and payments are due at the beginning of each week.

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=IPMT(5%/52, 30, 4*52, 10000, 0 ,1). So, the calculated IPMT excel value is $8.38.

Example #3

This next example returns the interest payment for a $6,500 investment that earns 5.25% annually for 10 years. The interest payment is calculated for the 4^th year and payments are due at the end of each year.

IPMT function as worksheet function:=IPMT(5.25%/1, 4, 10*1, 6500). So, the calculated IPMT value is $27.89.

Things to Remember

Below are the few error details that can come in IPMT function as the wrong argument will be passed in the functions.

Error handling #NUM!: If per value is < 0 or > the value of nper then IPMT function through a #NUM error.
Error handling #VALUE!: IPMT function through a #VALUE! Error when any non-numeric value has been passed in the IPMT formula.