Use the appropriate function(s) in Excel to answer the following questions.How much would your monthly payment be on a 4-year loan if the following assumptions were true?You borrowed $5,400.The fixed APR on the loan is 4.8%. Note: A fixed APR is an annual interest rate that does not change during the 4-year period.You will make equal monthly payments to repay both the loan amount and the monthly interest charges.You want to completely pay off the loan in exactly 4 years.(Round to the nearest cent, do not include a negative sign)
Question
Use the appropriate function(s) in Excel to answer the following questions.How much would your monthly payment be on a 4-year loan if the following assumptions were true?You borrowed $5,400.The fixed APR on the loan is 4.8%. Note: A fixed APR is an annual interest rate that does not change during the 4-year period.You will make equal monthly payments to repay both the loan amount and the monthly interest charges.You want to completely pay off the loan in exactly 4 years.(Round to the nearest cent, do not include a negative sign)
Solution
To calculate the monthly payment for a loan in Excel, you can use the PMT function. Here are the steps:
- Open Excel and click on a cell where you want the result to be displayed.
- Type
=PMT(into that cell. - The PMT function requires three arguments: rate, nper (number of periods), and pv (present value or the total amount of loan). In this case, the rate is 4.8% per year, but we need to convert it to a monthly rate by dividing by 12. The number of periods is 4 years, but we need to convert it to months by multiplying by 12. The present value is $5,400. So, type
4.8%/12, 4*12, 5400)after=PMT(. - The complete formula should look like this:
=PMT(4.8%/12, 4*12, 5400). - Press Enter.
- The result will be displayed as a negative number, because it represents a payment. To make it positive, you can modify the formula to
=-PMT(4.8%/12, 4*12, 5400). - The result is the monthly payment you would have to make to pay off the loan in exactly 4 years. Round it to the nearest cent.
Remember to replace the percentages and amounts with the actual values you are working with.
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