Microsoft Office Tutorials and References
In Depth Information
Figuring Loan Calculations
7. Click the cell where you entered the number of payments, or just
enter the cell address.
8. Enter a comma ( ,).
9. Click the cell where you entered the periodic payment amount, or just
enter the cell address.
10. Type a ), and press Enter.
As an example, assume a monthly payment amount of $600. The annual
interest rate is 5 percent. There are 24 monthly payments. Figure 5-8 shows a
worksheet with these figures.
With these assumptions, the loan principal is $13,676. Altering any of the
parameters will cause PV to return a different amount of principal. For
example, raising the interest rate to 7.5 percent tells you that you can only borrow
$13,333. Although you may often think of how much you’re borrowing, having
interest in the interest is just as important!
You can use two optional arguments with PV:
Future Value: The amount you want the loan to be worth at the end of
its life. The default is 0.
Type: This value tells the function whether payments are applied at the
end of the period or the beginning of the period. A value of 0 indicates
the end of the period. A value of 1 indicates the beginning of the period.
The default is 0.
These optional arguments, when used, become the respective fifth and sixth
arguments.
Figure 5-8:
The PV
function
calculates
the principal
amount
of a loan.
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