Excel PMT, FV, PV - Who uses the last option in the function and why?  (end of period/beginning of period)

brothertruffle880
brothertruffle880 used Ask the Experts™
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Which industries use the "end of period" and "beginning of period" options in the PMT, FV, PV and other financial functions.
When I've taken out a personal loan at the bank, I was never asked "Would you like to pay at the end of the month? or would you like to pay at the beginning of the month?"

Which types of transactions?  Is it non-USA entities?  Is it real estate? Asset-based loans?
Can anyone point to an article, blog post, or video that discusses who uses the last option in these financial functions.
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When I've taken out a personal loan at the bank, I was never asked "Would you like to pay at the end of the month? or would you like to pay at the beginning of the month?"
in fact, i have a car loan which i pay twice monthly

in another life (before retirement), i have repaid loans to coincide with my bi-weekly period (26 payments per year)
It's really about definitions and cash flows:

"What is the present value of a series of equal payments that start today?"
vs.
""What is the present value of a series of equal payments that start at the end of the first period?"
and so forth for FV and PMT as well.

Given that this is a reasonable question to ask under normal circumstances then I'd suggest that there isn't an industry or a country where it applies.  That's because of the nature of the analyst's question; when analyzing cash flows, one could be wanting to know the PV, NPV or FV starting at any time.  This tool just makes the analysis more convenient when applicable.
Information Technology Specialist
Commented:
end of period/beginning of period has nothing to do with when any payments are made (although it may dictate when they are due). It has to do with how the interest is computed. Most mortgages, if not all, are set up to make "payment in arrears" so, for example, if a home buyer is getting a mortgage and goes to settlement on February 15th, he/she will pay the "odd days interest" at settlement for the 13 days remaining in February, but his/her first payment will not be due until April 1st which will pay the mortgagee its interest for March (i.e. at the end of the period). Most other lending institutions (e.g. Credit Card companies) will collect their interest from the beginning of the period. In general, amortized loans will be end of period and non-amortized loans will be beginning of period.

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Commented:
Thanks for this.  Very detailed and useful.  Have a great weekend.

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