Returns the portion of the periodic payment which is repaid capital for a fixed rate loan or annuity.
PPMT(rate, period, numperiods, presentvalue, futurevalue, type)
rate: the interest rate per period.
period: the period of the payment whose repaid capital portion is to be calculated, numbered from 1.
numperiods: the total number of payment periods in the term.
presentvalue: the initial sum borrowed or invested.
futurevalue: the cash balance you wish to attain at the end of the term (optional - defaults to 0). With a loan, this would normally be 0.
type: when payments are made (optional - defaults to 0):
0 - at the end of each period.
1 - at the start of each period (including a payment at the start of the term).
With a fixed rate loan, where you make a constant payment each period to pay off the loan over the term, some of each period payment is interest on the outstanding capital, and some is a repayment of capital. Over time (as you pay off capital), the interest becomes less and the capital repayment becomes more.
PPMT returns the capital repaid in the payment of a specified period. IPMT returns the interest paid in the payment of that period. Together they add up to the actual payment, given by PMT. PPMT is calculated as PMT - IPMT.
When payments are made at the end of each period, the relevant IPMT interest arises during that period.
When payments are made at the start of each period, the relevant IPMT interest arises during the preceding period.
By convention, money that you receive is positive, and money you pay is negative. For a loan where you receive a lump sum at the start, presentvalue is positive. For an investment where you pay a lump sum at the start, presentvalue is negative.
PPMT(5.5%/12, 12, 12*2, 5000, 0, 0)
returns -207.75 in currency units. You take out a 2 year loan of 5000 currency units at a yearly interest rate of 5.5%, making monthly payments at the end of the month. In the 12th month you make your usual monthly repayment, of which 207.75 is repayment of capital.