Use Excel to calculate the total interest on a $818,363 loan for a small business making monthly payments with an interest rate of 4% over 30 years.Round your answer to the nearest hundredth. Enter your answer as a positive number.
Question
Use Excel to calculate the total interest on a $818,363 loan for a small business making monthly payments with an interest rate of 4% over 30 years.Round your answer to the nearest hundredth. Enter your answer as a positive number.
Solution
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Open Excel and in cell A1, type "Principal", in cell A2, type "Interest Rate", in cell A3, type "Loan Term", and in cell A4, type "Monthly Payment".
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In cell B1, enter the principal amount of the loan, which is $818,363.
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In cell B2, enter the annual interest rate divided by 12 (to get the monthly interest rate). The annual interest rate is 4%, so you would enter "=4%/12" or "0.04/12".
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In cell B3, enter the loan term in months. The loan term is 30 years, so you would enter "=30*12" or "360".
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In cell B4, calculate the monthly payment using the PMT function. The PMT function in Excel is used to calculate the monthly payment of a loan. The syntax of the PMT function is "=PMT(rate, nper, pv, [fv], [type])". In this case, you would enter "=PMT(B2, B3, -B1)". The negative sign in front of B1 is used because this is an outgoing payment.
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In cell A5, type "Total Interest", and in cell B5, calculate the total interest paid over the life of the loan. This can be calculated by multiplying the monthly payment by the loan term and then subtracting the principal. So, you would enter "=B4*B3-B1".
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The value in cell B5 is the total interest paid over the life of the loan. Round this value to the nearest hundredth using the ROUND function. So, you would enter "=ROUND(B5, 2)" in cell B6.
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The value in cell B6 is the total interest paid over the life of the loan, rounded to the nearest hundredth. This is your final answer.
Similar Questions
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