You work as an Office Assistant for Pecuniary Inc. You are creating a report in a workbook in
Microsoft Excel. The company borrowed a sum of $1000000 at 6% interest rate, which is to be paid
within 24 months. You are required to prepare a report in a workbook in Microsoft Excel, which
shows the calculation of monthly installments to be paid to repay the loan. Which of the following
formulas will you use to accomplish the task?
A.
PMT(1000000, 6/12, 24, 0, 0)
B.
PMT(6%/12, 24, 1000000, 0, 0)
C.
PMT(1000000, 6%/12, 24, 0, 0)
D.
PMT(6/12, 24, 1000000, 0,0)
Explanation:
According to the question, you have to calculate monthly installments for repayment of loan on
principal amount of $1000000 borrowed at 6 percent fixed yearly interest rate to be paid within 24
months. In order to accomplish the task, you will have to use the following formula:
PMT(6%/12, 24, 1000000, 0, 0)
A PMT() function is used in Excel to calculate payments due on a loan, assuming a constant interest
rate and constant payments.
Syntax:
PMT (Rate, NoOfPayments, PV, FV, Type)
Here,
Rate is the rate of interest to be divided by 12 for monthly payments.
NoOfPayments is the total number of payment for the loan.
PV is the principal value.
FV is the forward value. It is the left over at the end of the payment cycle, usually left blank.
Type is either 0 or 1 indicating whether payments are made at the beginning or at the end of the
month. Usually left blank which indicates 0 (end of month).
Answer A and C are incorrect. These formulas contain incorrect syntaxes of the function.
Answer D is incorrect. It is required to provide rate of interest with percent symbol (%) in the
formula.