Calculating the amount of principal you’ve paid on a loan lets you determine the amount of equity you have in a purchase and what your new monthly payment would be if you refinanced the loan at a specific interest rate and for a given length of time. Calculating the interest paid on a loan lets you find the amount of interest you paid in a year, which you can often write off on your tax return.
- [Narrator] Calculating the amount of principal…you've paid on a loan lets you determine…the amount of equity you have in a purchase.…That would include your down payment,…plus any loan principal paid,…plus appreciation, if any.…And also what your new monthly payment would be…if you refinanced the loan at a specific interest rate…for a given length of time.…Calculating the interest paid on a loan…lets you find the amount of interest you paid in a year,…which you can often write off in your tax return.…In this movie I will show you how to calculate the principal…and interest components of a loan payment.…
My sample file is PrincipalAndInterest_01_02.…And you can find it in the chapter one folder…of your exercise files collection.…The two formulas that we will create…take the same set of arguments.…So I'll just go through them up front.…The first in cell C3 is the loan rate,…and that is the interest rate…that you will be paying your bank…for the right to use the money.…I have it set at 8%.…Next you need to let Excel know which period…
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- Recall what the type argument is used to determine when using the PMT function.
- Identify what the M stands for in the ACCRINTM function.
- Name the accounting rules used by the AMORDEGRC function to assign a depreciation coefficient to an asset.
- Recall what internal rate of return generated by the IRR function should be measured against to determine if it is a good investment.
- List the three regular intervals that coupon bonds pay interest at.
- Determine the function that provides a more conservative bond evaluation compared to the DURATION function.
- Explain what the RECEIVED function shows.
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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