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CUMPRINC and CUMIPMT: Calculating cumulative principal and interest paid between periods

From: Excel 2010: Financial Functions in Depth

Video: CUMPRINC and CUMIPMT: Calculating cumulative principal and interest paid between periods

When you pay back a loan, each payment has a principal component and an interest component. Payments early in the loan's life consists mostly of paying down the interest. All payments late in the loan's life are almost entirely principal. You can determine the cumulative interest and principal you've paid on the loan by using this CUMIPMT function and CUMPRINC function. In this workbook, I have added the arguments that we need. The first is the annual interest rate and the second is the Number of periods and that's simply the number of payments in the loan.

CUMPRINC and CUMIPMT: Calculating cumulative principal and interest paid between periods

When you pay back a loan, each payment has a principal component and an interest component. Payments early in the loan's life consists mostly of paying down the interest. All payments late in the loan's life are almost entirely principal. You can determine the cumulative interest and principal you've paid on the loan by using this CUMIPMT function and CUMPRINC function. In this workbook, I have added the arguments that we need. The first is the annual interest rate and the second is the Number of periods and that's simply the number of payments in the loan.

In this case, I'm assuming a 30 year loan with 12 monthly payments per year, so it's a total of 360 and then we have the Present value of 615,000. Now in previous movies in this course you've seen that the present value is negative, because it's an amount that you owe. However, the way that these functions work we need to have the present value a positive number. So it's a little bit different, but hopefully you'll remember that. The Starting period is the first payment for which we want to start our calculations of cumulative interest or cumulative principal payment.

The Ending period is the last period and then Type is either 0 or 1. And this indicates when you make your payment. If it's 0, which is the default, then Excel assumes that you're making your payment at the end of a period, in this case the last day of the month, or May 30th. If it's 1, then that indicates the beginning of a period, so for example May 1. With all that information in place we can create our formulas. So for the principal, I'll =CUMPRINC( and now I can start typing in the cell references. So the Rate is in cell c3, but that's an annual rate.

And we are making monthly payments so we need to divide that by 12, twelve months in the year, then a comma, and the number of periods is in cell c4. Present value c5, the starting period is c6, and then a comma, the ending period is in c7, a comma, and the type is in cell c8. Type a right parenthesis and looking over the formula, I am dividing the interest rate by 12. Always important.

My intention in creating this formula with these arguments is to find the cumulative principal that I paid off from payments 1 through 12, or in the first year of my loan. So with that in mind I can press Enter and see that I have paid off over $9,279 in principal. And the number is displayed as a negative number in red because that is money that is going out of my account and we can do the same thing to find the total interest. I'll move through the formula more quickly this time because I use all the same arguments.

So it's equal, then cumulative interest payment, so CUMIPMT(, and then the rate is in cell c3, divided by 12 for monthly payments, then a comma, number of periods in c4, comma, present value c5, comma, starting period c6, comma, ending period c7, and then the type is in cell c8 and right parenthesis. Everything looks good. I'll press Tab so I don't make the screen scroll, and in the first year of this loan, I would have paid off almost $30,000 in interest.

Now let's see how those numbers change as we move through the loan's period. So let's say that we start after 10 years so it would be during year 11, so we would have period 121 and then the ending period would be 132. So I press Enter and then we see that the principal is over 15,000 and interest is almost 24. So the ratio is closer. Now let's go to 241 to 252 and press Enter and we see that the principal has outstripped the interest and we're paying almost twice as much principal as we are our interest.

And then in the last few months of the loan if we go from period 349 to period 360 we'll see that we're paying almost exclusively principal. Pay down principal on a loan gives you equity in the asset you're paying off and you might be able to right off the interest. You should check with your tax advisor to see how you can use those factors to your advantage.

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This video is part of

Image for Excel 2010: Financial Functions in Depth
Excel 2010: Financial Functions in Depth

52 video lessons · 14103 viewers

Curt Frye
Author

 
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  1. 2m 11s
    1. Welcome
      1m 6s
    2. Using the exercise files
      36s
    3. Disclaimer
      29s
  2. 28m 32s
    1. PMT: Calculating a loan payment
      3m 31s
    2. PPMT and IPMT: Calculating principal and interest per loan payment
      4m 18s
    3. CUMPRINC and CUMIPMT: Calculating cumulative principal and interest paid between periods
      4m 30s
    4. ISPMT: Calculating interest paid during a specific period
      2m 13s
    5. EFFECT and NOMINAL: Finding nominal and effective interest rates
      3m 31s
    6. ACCRINT and ACCRINTM: Calculating accrued interest for investments
      4m 15s
    7. RATE: Discovering the interest rate of an annuity
      2m 41s
    8. NPER: Calculating the number of periods in an investment
      3m 33s
  3. 19m 5s
    1. SLN: Calculating depreciation using the straight-line method
      1m 48s
    2. DB: Calculating depreciation using the declining balance method
      3m 10s
    3. DDB: Calculating depreciation using the double-declining balance method
      3m 20s
    4. SYD: Calculating depreciation for a specified period
      2m 13s
    5. VDB: Calculating declining balance depreciation for a partial period
      3m 24s
    6. AMORDEGRC: Calculating depreciation using a depreciation coefficient
      2m 27s
    7. AMORLINC: Calculating depreciation for each accounting period
      2m 43s
  4. 22m 33s
    1. FV: Calculating the future value of an investment
      2m 48s
    2. FVSCHEDULE: Calculating the future value of an investment with variable returns
      2m 21s
    3. PV: Calculating the present value of an investment
      2m 6s
    4. NPV: Calculating the net present value of an investment
      3m 17s
    5. IRR: Calculating internal rate of return
      2m 33s
    6. XNPV: Calculating net present value given irregular inputs
      2m 32s
    7. XIRR: Calculating internal rate of return for irregular cash flows
      1m 48s
    8. MIRR: Calculating internal rate of return for mixed cash flows
      2m 2s
    9. DISC: Calculating the discount rate of a security
      3m 6s
  5. 24m 12s
    1. COUPDAYBS: Calculating total days between coupon beginning and settlement
      3m 2s
    2. COUPDAYS: Calculating days in the settlement date's coupon period
      2m 48s
    3. COUPDAYSNC: Calculating days from the settlement date to the next coupon date
      3m 1s
    4. COUPNCD: Calculating the next coupon date after the settlement date
      2m 43s
    5. COUPNUM: Calculating the number of coupons between settlement and maturity
      2m 55s
    6. COUPPCD: Calculating the date of a coupon due immediately before settlement
      3m 4s
    7. DURATION: Calculating the annual duration of a security
      3m 20s
    8. MDURATION: Calculating the duration of a security using the modified Macauley method
      3m 19s
  6. 28m 43s
    1. DOLLARDE and DOLLARFR: Converting between fractional prices and decimal prices
      2m 36s
    2. INTRATE: Calculating the interest rate of a fully invested security
      2m 50s
    3. RECEIVED: Calculating the value at maturity of a fully invested security
      2m 46s
    4. PRICE: Calculating the price of a security that pays periodic interest
      3m 19s
    5. PRICEDISC: Calculating the price of a discounted security
      2m 48s
    6. PRICEMAT: Calculating the price of a security that pays interest at maturity
      1m 57s
    7. TBILLEQ: Calculating the bond-equivalent yield for a Treasury bill
      1m 50s
    8. TBILLPRICE: Calculating the price for a Treasury bill
      1m 31s
    9. TBILLYIELD: Calculating the yield of a Treasury bill
      1m 41s
    10. YIELD: Calculating the yield of a security that pays periodic interest
      2m 59s
    11. YIELDDISC: Calculating the annual yield for a discounted security
      2m 9s
    12. YIELDMAT: Calculating the annual yield of a security that pays interest at maturity
      2m 17s
  7. 12m 1s
    1. ODDFPRICE: Calculating the price of a security with an odd first period
      3m 17s
    2. ODDFYIELD: Calculating the yield of a security with an odd first period
      3m 3s
    3. ODDLPRICE: Calculating the price of a security with an odd last period
      2m 44s
    4. ODDLYIELD: Calculating the yield of a security with an odd last period
      2m 57s
  8. 1m 5s
    1. Additional resources
      1m 5s

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