# Payments

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```					Save this excel as: last name_pay
Calculating a Payment Using the Payment Formula

The Payment Formula is:               PMT(rate,nper,pv,fv,type)

Rate:       Must be expressed as a % for 12 monthes
Nper        Total number of payments in months
Pv          What the current value of the item is right now
Fv          How much you owe after making all of the payments
Type        Always either a 1 or a 0. You should use a 1.

1. Example
You are buying a computer that costs \$1,000 and financing it for 3 years at 6%.

In the formula bar you will type the following:

PMT(.06/12,36,1000,0,1)                           The 1 means your payment is
due on the 1st of the month

6% divided by                                  How much you owe after your
12                                             last payment. Duh!

How much the
3 years of
computer costs today
payments in
months

Type the formula in the yellow box and see what the payment will be >>>>

3. Practice Makes Perfect
Calculate the following payments. Put the formulas in the yellow cells.

Finance a car that costs \$20,000 at 6% for 3 years.
Finance a car that costs \$20,000 at 12% for 3 years.
Finance a car that costs \$20,000 at 0% for 3 years.

Finance a house that costs \$200,000 at 7% for 30 years.
2. You do it:
You are considering the same computer that cost
\$1,000. But now you are considering financing it for
4 years at 15%. What would your payment be?

Enter the PMT formula here >>

Now calculate the payment for the same computer (\$1,000)
for 4 years at 6%. What are the payments?
Put the PMT formula here>>>>

Which payment is higher? The one at 15% or
the one at 6%? Put your answer on the yellow line below.

Why is one payment higher than the other? They are both
for the same amount of money (\$1,000). Answer below.
Use the list below to find a car you really like. Find
much it costs. When you know how much is costs,
total cost in cell B17. Then complete the assignme
Car Name

Create a hyperlink on the name of the car that goes to the webpage with the cost

Lincoln     Toyota
CAR                                                          Mercury     Nissan     For a more complete description o
COST                                                         Chevrolet   Hyundai    function.
>>>>>>>                                                      Buick       Jaguar
Rate   is the interest rate for the lo
Chrysler    BMW
Dodge       Lexus      Nper   is the total number of paym
Jeep        Honda
General     Land       Pv is the present value, or the to
Motors      Rover      payments is worth now; also know
Aston
Volvo       Martin     Fv is the future value, or a cash
Rolls-     payment is made. If fv is omitted, i
Saab        Royce      future value of a loan is 0.
Porsche     Subaru
Type   is the number 0 (zero) or 1
Volkswag
en       Acura         Set type equal to If payments are
0 or omitted At the end of the perio
Mitsubishi Saturn      1 At the beginning of the period
Infinity   Hummer
Remarks
If you make monthly payments on
Car Cost                  Interest              Months to                Payment    rate of 12 percent, use 12%/12 for
Rate                  Pay Off
Example 1
6%                     36
6%                     60                          Data Description
6%                     96                          8% Annual interest rate
10 Number of months of payments
10000 Amount of loan
10%                     36                          Formula Description (Result)
20%                     36                          =PMT(A2/12, A3, A4) Monthly pay
24%                     36                          1,037.03)
=PMT(A2/12, A3, A4, 0, 1) Monthl
terms, except payments are due a

Note The interest rate is divided
number of years the money is p
number of payments.
number of payments.

Paste a picture of the car you want to buy below this sentence.
really like. Find out how
much is costs, put the
e the assignment.

PMT(rate,nper,pv,fv,type)
or a more complete description of the arguments in PMT, see the PV

Rate   is the interest rate for the loan.

Nper   is the total number of payments for the loan.

Pv is the present value, or the total amount that a series of future
ayments is worth now; also known as the principal.

v is the future value, or a cash balance you want to attain after the last
ayment is made. If fv is omitted, it is assumed to be 0 (zero), that is, the
uture value of a loan is 0.

ype   is the number 0 (zero) or 1 and indicates when payments are due.

Set type equal to If payments are due
or omitted At the end of the period
At the beginning of the period

f you make monthly payments on a four-year loan at an annual interest
ate of 12 percent, use 12%/12 for rate and 4*12 for nper.

Data Description
% Annual interest rate
0 Number of months of payments
0000 Amount of loan
ormula Description (Result)
PMT(A2/12, A3, A4) Monthly payment for a loan with the above terms (-

PMT(A2/12, A3, A4, 0, 1) Monthly payment for a loan with the above
erms, except payments are due at the beginning of the period (-1,030.16)

Note The interest rate is divided by 12 to get a monthly rate. The
umber of years the money is paid out is multiplied by 12 to get the
umber of payments.
umber of payments.
Use the Internet to find companies that make new homes an area that you would like to live. Look at their websites to find a hom
limit - cost is no problem. When you have found the house you like, fill in the chart below, in the yellow cells.

How much did you really pay for
Maker       Model       Cost        Payment for                                the house after 30 years?
30 years at 6%                              (monthly pmt X 12 X 30)

Now, calculate the loan cost using slightly different data.                    How much did you really pay
for the house after 15 years?
Maker       Model       Cost        Payment for                                (monthly pmt X 12 X 15)
15 years at 6%

The total cost after 30 years was (F9):
The total cost after 15 years was (F16):

=PMT(rate,nper,pv,fv,type)
For a more complete description of the arguments in PMT, see the PV function.

Rate is the interest rate for the loan.
Nper is the total number of payments for the loan.
Pv is the present value, or the total amount that a series of future payments is worth now; also known as
the principal.
Fv is the future value, or a cash balance you want to attain after the last payment is made. If fv is omitted
is assumed to be 0 (zero), that is, the future value of a loan is 0.
k at their websites to find a home you would like to own. The sky is the

eally pay for             How much interest
do you pay? (30 yr)
(total cost with interest minus house cost)

How much interest
do you pay? (15 yr)
(total cost with interest minus hose cost)

s is worth now; also known as

yment is made. If fv is omitted, it
Tom graduated from college last year and found a new job. The job pays \$2,500.00 per month. Tom's budget shows below.
See if you can figure out if Tom makes enough money to pay his bills.

Tom's Monthly Income               \$2,500.00
Expences
Jan               Feb             Mar             Apr             May
Rent                                 \$600.00         \$600.00         \$600.00         \$600.00         \$600.00
Electric                              \$30.00          \$55.00          \$65.00          \$85.00         \$100.00
Water                                 \$22.00          \$22.00          \$22.00          \$22.00          \$22.00
Car payment                          \$500.00         \$500.00         \$500.00         \$500.00         \$500.00
Insurance for car                    \$125.00         \$125.00         \$125.00         \$125.00         \$125.00
Apartment Insurance                   \$20.00          \$20.00          \$20.00          \$20.00          \$20.00
Taxes on salary                      \$825.00         \$825.00         \$825.00         \$825.00         \$825.00
Clothing                              \$50.00          \$50.00          \$50.00          \$75.00          \$75.00
Entertainment                        \$100.00         \$100.00         \$100.00         \$100.00         \$100.00
Credit Card payments                 \$110.00         \$110.00         \$110.00         \$110.00         \$110.00
Food                                 \$150.00         \$150.00         \$150.00         \$150.00         \$150.00
Total Expences

Average Monthly Expense:

Tom's Income for
the entire year?

Tom's expences
for the entire year?

Balance?
(income minus expences)
om's budget shows below.

June        July         Aug        Sept         Oct       Nov       Dec.      Totals
\$600.00      \$600.00    \$600.00      \$600.00 \$600.00 \$600.00 \$600.00
\$115.00      \$115.00    \$120.00      \$115.00    \$85.00    \$55.00    \$50.00
\$22.00       \$22.00     \$22.00       \$22.00    \$22.00    \$22.00    \$22.00
\$500.00      \$500.00    \$500.00      \$500.00 \$500.00 \$500.00 \$500.00
\$125.00      \$125.00    \$125.00      \$125.00 \$125.00 \$125.00 \$125.00
\$20.00       \$20.00     \$20.00       \$20.00    \$20.00    \$20.00    \$20.00
\$825.00      \$825.00    \$825.00      \$825.00 \$825.00 \$825.00 \$825.00
\$75.00       \$75.00     \$25.00       \$25.00 \$100.00 \$100.00        \$50.00
\$100.00      \$100.00    \$100.00      \$100.00 \$100.00 \$100.00 \$100.00
\$110.00      \$110.00    \$110.00      \$110.00 \$110.00 \$110.00 \$110.00
\$150.00      \$150.00    \$150.00      \$150.00 \$150.00 \$150.00 \$150.00

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