Another application you might find yourself fairly frequently is a spreadsheet application. I currently have Microsoft Excel open. It's definitely the most popular and well-known spreadsheet program out there, but if you're using another spreadsheet application, you'll still be able to follow along with what I am showing you in this movie. At its most basic level, a spreadsheet is the electronic equivalent of a paper ledger sheet. Like ledgers, spreadsheets are comprised of a grid of rows and columns and can be used for balancing your checkbook, calculating loans, managing the addresses and contact information of customers, and so on.
One of the advantages of spreadsheet programs is that they can quickly perform complex calculations once you've set them up to do so. For example, I am going to click the Office button, choose New, and check out some of the installed templates that come with Excel. And here I am going to select the Loan Amortization template and click Create. So this is a pre-made worksheet to help you figure out how much a loan will end up costing you. In this case, all you have to do is plug in your own numbers in the orange colored areas. So maybe I am looking at a $75,000.00 loan with an annual interest rate of 3.9%.
It automatically added the percentage symbol for me there. We will do that over a period of 3 years. Number of payments per year, we'll say it's a monthly payment, so 12 payments per year. And start date of the loan we'll say is October 1st 2010, and I will press Enter or Return. And instantly the entire worksheet updates itself to reflect the numbers I have entered, and I am not going to bother with the optional extra payments here. So I can see the Loan summary to the right, saying how much my monthly payment is going to be, $2,210.96, as well as the total interest I am going to pay over the life of loan, $4,594.71.
And below that I see the details of things like how much principle and interest I will be paying with each installment. This is a great way to see how much your monthly payments will be at various interest rates, and how much you'll end up paying over the life of the loan. I can easily switch on any of the original numbers, so for instance, I get a better rate, say I got a 1.9% rate. I can plug that in to instantly see how it affects my payments. Obviously, if we had to do this with a paper and a calculator it will take much longer. Now this is more of a formatted and stylized spreadsheet.
In many cases you probably won't create something quite this elaborate yourself. But let's use this amortization table down here to go over some basic terminology considering spreadsheets. As I mentioned, in a spreadsheet you've columns and rows. Columns are vertical and are designated by letters as you see going across the top of the spreadsheet. So we have A, B, C, D and so on. So what happens when you run out of numbers of your columns? Well, if you have more than 26 columns, all columns after Z will be designated with double letters. So after you hit Z, the next column will be AA, BB, CC and so on.
Usually, you'll create your own more meaningful headers for your columns like we have in this worksheet, like Beginning Balance, Scheduled Payment, Extra Payment and so on. Now rows are horizontal and they are designated by numbers. In this case the rows in the amortization table are used to show the data for each monthly payment on your loan, and again, you might create more meaningful names for your rows other than just using the numbers. Generally, you will use that column letters and row numbers in conjunction with each other when you want to perform calculations, which we will take a look at later. Now the points where rows and columns meet are called cells.
Cells are refereed to according to their column letter and row number. So for example, in this particular cell, the one with $112.33 would be cell H20. The cell up here, Start date of the loan, would be cell D9. So it's into cells we actually enter you data. The data you enter into your cells can be numbers, letters, special characters or any combination of those, or the cells can automatically populate themselves if you apply formulas to them. And that's pretty much how all the cells in an amortization table work. Their contents are automatically determined and updated based on the numbers you enter into the orange cells in the upper left-hand corner of the worksheet.
Okay, so that's a brief introduction to what spreadsheets are and what they can be used for.
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