Virginia is considering taking out a loan to purchase more products to rent to customers. In order to purchase the products she needs, she has determined that she needs to borrow $12,000. She would like you to help her determine her monthly payment based on the loan amount, an interest rate of 7.5% with a repayment of the loan after 5 years.On the LoanData worksheet, in cell B6, determine the monthly payment.In cell B6, edit the formula to return an absolute value.
Question
Virginia is considering taking out a loan to purchase more products to rent to customers. In order to purchase the products she needs, she has determined that she needs to borrow $12,000. She would like you to help her determine her monthly payment based on the loan amount, an interest rate of 7.5% with a repayment of the loan after 5 years.On the LoanData worksheet, in cell B6, determine the monthly payment.In cell B6, edit the formula to return an absolute value.
Solution
To calculate the monthly payment for a loan, you can use the PMT function in Excel. Here's how you can do it:
- Open the LoanData worksheet.
- Click on cell B6 to select it.
- Enter the following formula:
=PMT(7.5%/12, 5*12, -12000)
This formula uses the PMT function to calculate the monthly payment for a loan with an annual interest rate of 7.5% (which is divided by 12 to get the monthly interest rate), a term of 5 years (which is multiplied by 12 to get the number of monthly payments), and a loan amount of $12,000.
The PMT function returns a negative value because it represents a payment being made from you to the lender. If you want to display this as a positive number, you can modify the formula to return an absolute value:
- Edit the formula in cell B6 to:
=ABS(PMT(7.5%/12, 5*12, -12000))
Now, the monthly payment will be displayed as a positive number in cell B6.
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