When you take out a loan, you or your accountant might need to know how much interest you paid for a given period. If you borrow $250,000 for some facility upgrades, you might be able to write off some or all of the interest paid for a given month, quarter, or year. You can discover how much interest you paid on a loan by using the ISPMT function.
- [Voiceover] When you take out a loan,…you or your accountant might need to know…how much interest you paid for a given period.…For example, if you take a short-term loan…for some construction of $7,320,000…at a rate of 6.125% you might need to know,…specifically, how much interest you pay in a specific month.…In this movie, I will show you how to calculate that amount.…My sample file is the InterestInPeriod_01_04 workbook,…and you can find it in the Chapter 1 folder…of the exercise files collection.…
To do this calculation, we need four pieces of information.…The first is the annual percentage rate.…The second is the period for which…you want to calculate the interest.…Next is the number of periods, in other words,…the number of payments in the loan.…And finally, the amount you borrow,…which is called a present value.…To create the formula, I'll click in cell C9,…then type an = sign, and I'll type in the function,…ispmt, which returns returns the interest paid…during a specific period.…
There are four arguments.…
- Define NPER.
- Determine the appropriate method of depreciation to use on tax returns.
- Recall which function is used to evaluate a fixed-rate investment or an annuity that makes periodic payments to the beneficiary.
- Identify the term for the rate of return earned from a zero-risk investment.
- Explain the purpose of the XNPV function.
- Recognize the type of bond that pays interest before it matures.
- Name three arguments needed to use the TBILLYIELD function.
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. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 24s
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