Financing Formula Reference Guide
Student study guide for the core financing equation variables: PV, PMT, I, N, and FV.
| Variable | Meaning | Student Reminder |
|---|---|---|
| PV | Present Value / Loan Amount | The amount being borrowed or financed. |
| PMT | Payment | The recurring payment, usually monthly. |
| I | Interest Rate | Use the annual rate, but convert to a monthly rate for monthly-payment problems. |
| N | Number of Payments | Years × 12 for monthly payments, unless the problem already gives months. |
| FV | Future Value / Balloon Balance | The balance remaining at the end of the term; often 0 for fully amortized loans. |
Payment Formula
PMT = (PV × (1+i)^N - FV) × i ÷ ((1+i)^N - 1)
Where i is the periodic interest rate. For monthly loans, divide the annual rate by 12.
Exam Tip
Always identify the unknown first. Then confirm the remaining values are entered in the correct period: monthly payment problems require a monthly interest rate and monthly number of payments.