Chapter 6 Lesson 4 PMT Function

Amortization Tables and the PMT Function Amortization is a method for computing periodic payments for an loan. loans and are often installment loans. Each installment, or payment, is the same and consists of two parts: a portion to pay due on the principal for that period and the remainder which reduces the . The principal is the amount of money and it decreases with each payment made. equal installment Car mortgages interest principal owed

=PMT(rate/12,#of payments,-principal) Amortization Tables An amortization table displays the and amounts for each payment of an installment loan. The PMT function is used to calculate the equal periodic payment for an installment loan. The PMT function takes the form: Remember to: 1. Divide the interest rate by to find the monthly rate. 2. The principal amount should be because it is the amount borrowed and it does not include a sign or when entered. interest principal =PMT(rate/12,#of payments,-principal) 12 negative dollar commas

Loan Amortization Table Interest rate = 7% Number of payments = 60 Principal = $ 200,000.00 Monthly payment = $3,960.24 Total paid = $237,614.38 Total interest = $37,614.38 Payment Principal Pay to Interest Pay to Principal Principal Owed 1 $200,000.00 $1,166.67 $2,793.57 $197,206.43 2 $197,206.43 $1,150.37 $2,809.87 $194,396.56 $194,396.56 $1,133.98 $2,826.26 $191,570.30