Most loans, whether between businesses or made by businesses to individual borrowers, are fully amortized. “Fully amoritzed” means that the monthly payments made over the term of the loan pay off the principal and all accrued interest. In Excel, you can calculate the monthly payments required to pay off a fully amortized loan using the PMT function.
- [Voiceover] Very few businesses are able…to perform all of their operations…using their own money.…Instead, they often need to sell stock…or take out bank loans, or both.…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.…In Excel, you can calculate the monthly payments…required to pay off a fully amortized loan…using the PMT, or payment function.…
I'll demonstrate how to use the PMT function in this movie.…My sample file is LoanPayment_01_01,…and you can find it in the chapter one folder…of your exercise files collection.…The PMT function takes five arguments.…The first three arguments, which are rate,…shown here in C3, the number of periods…or number of payments, shown in C4,…and the present value of the loan,…which is shown in C5.…Those three arguments are required.…
Rate is the interest rate, number of periods…is the number of payments,…
- Analyzing loans, payments, and interest
- Calculating depreciation
- Determining values and rates of return
- Calculating bond coupon dates and security durations
- Calculating security prices and yields
- Calculating prices and yields of securities with odd periods
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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