Microsoft Office Tutorials and References

In Depth Information

**Figuring Loan Calculations**

that goes toward reducing the principal of the loan and another portion that

is interest. With the PPMT function, you can find out the amount that reduces

the principal.

The ratio of the interest portion to the payment on principal portion varies

payment by payment. In a typical loan, the portion of the payment that

is interest is highest in the first period and is reduced in each successive

period. Turning that around, the last payment is almost all toward paying

down the principal.

The PPMT function takes four inputs: the principal, the interest rate, the

number of payments for the loan, and the number of the payment in

question. For example, a loan may have 36 payments, and youâ€™re interested in

how much principal is included in just the last payment. Here are the steps

to use this function:

1. Enter the loan principal, the annual interest rate, the number of

payment periods, and the number of the actual period for which the

interest is to be calculated in separate cells within the worksheet.

You can add labels to adjacent cells to identify the values, if you want.

2. Position the cursor in the cell where you want the results to appear.

3. Enter
=PPMT(
to begin the function entry.

4. Click the cell where you entered the interest rate, or just enter the cell

address.

5. Enter
/12
to divide the annual interest rate to get the monthly

interest rate.

6. Enter a comma (
,).

7. Click the cell where you entered the number of the payment to

analyze, or just enter the cell address.

8. Enter a comma (
,).

9. Click the cell where you entered the number of payments, or just

enter the cell address.

10. Enter a comma (
,).

11. Click the cell where you entered the principal amount, or just enter

the cell address.

12. Type a
), and press Enter.