Calculating payments for a fully amortized loan

Most loans, whether between businesses or made by businesses to individual…borrowers, are fully amortized.…Fully amortized means that the monthly payments made over the term of the loan…pay off the principal and all accrued interest.…You can calculate the monthly payments required to pay off a fully amortized…loan using the PMT function.…PMT is short for payment.…The PMT function has five arguments: rate, number of periods, present value,…future value and a type.…The first three arguments, rate, numbers of periods and present value are required.…

I'll type in PMT and left parentheses to show you the arguments in the…order that they occur.…Rate is the annual percentage rate divided by the number of payments made each year,…usually 12 representing the 12 months.…So, if I were to type in the rate or in this case the address of the cell…that contains the rate, I would type in B5 divided by 12. Again this is monthly payments.…So there are 12 months per year.…I have to divide the rate by 12 to turn it into a monthly rate.…