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#1
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PMT question
I need help with the following problem. "A person is going to buy a house. The cost of the house is $300,000, and the person is going to make a 15% down payment. The balance will be financed with a 30-year mortgage at 6% APR, with monthly payments. Using the PMT function, calculate the amount of the monthly payment, the total amount paid in 30 years, and the total interest paid." Ok I think the pmt function is PMT(.06/12,30*12,255,000) Is that correct? What does he mean by "Using the PMT function, calculate the amount of the monthly payment, the total amount paid in 30 years, and the total interest paid."? Thanks for any help!!! -- SMAlvarez ------------------------------------------------------------------------ SMAlvarez's Profile: http://www.excelforum.com/member.php...o&userid=33287 View this thread: http://www.excelforum.com/showthread...hreadid=560939 |
#2
Posted to microsoft.public.excel.worksheet.functions
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PMT question
SMAlvarez wrote:
I need help with the following problem. "A person is going to buy a house. The cost of the house is $300,000, and the person is going to make a 15% down payment. The balance will be financed with a 30-year mortgage at 6% APR, with monthly payments. Using the PMT function, calculate the amount of the monthly payment, the total amount paid in 30 years, and the total interest paid." Ok I think the pmt function is PMT(.06/12,30*12,255,000) Is that correct? (Typo: Change "255,000" to "255000", which is what you intended.) Perhaps; perhaps not. First, change "255,000" to "255000", which I'm sure is what you intended to write. Just a typo. The primary issue is with the term "APR". That has a special meaning; but many people misuse the term. You are assuming that 6% is the "annual interest rate" (or nominal rate). And that might very well be what was intended. On the other hand, "APR" might refer to the effective "annual percentage rate" of the compounded monthly rate. If that is the intent, ".06/12" should be replaced by RATE(12,0,-1,1+6%). On the "third hand", for US mortgages, "APR" has a very technical meaning that goes beyond just "the effective annual percentage rate of the compounded monthly rate". Since you do not provide (and might not have) sufficient information to compute the US "truth in lending" APR, I presume that definition does not apply to this problem. Bottom line: perhaps you should ask your teacher for clarification about what he/she means by "6% APR". If "6% APR" is intended to mean "6% annual interest rate", your formula is essentially correct (after correcting the typo). But note with those parameters, PMT will return a negative number -- which some people will insist is indeed the correct sign of the result. If you want a positive number (as I prefer), change that last parameter to a negative number. What does he mean by "Using the PMT function, calculate the amount of the monthly payment, the total amount paid in 30 years, and the total interest paid."? The total amount paid is 30*12*PMT(...). The total interest paid is the total amount paid minus the principal (255000). |
#3
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PMT question
Ok so the "the monthly payment" is 30*12*PMT(.06/12,30*12,255000)? and "the total amount paid in 30 years" is $300,000? and "total interest paid" - whatever 300,000 - 255,000 is? Is that true? Thanks for all your help man!. -- SMAlvarez ------------------------------------------------------------------------ SMAlvarez's Profile: http://www.excelforum.com/member.php...o&userid=33287 View this thread: http://www.excelforum.com/showthread...hreadid=560939 |
#4
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PMT question
maybe im wrong. Is the monthly payment whatever the answer is to PMT(.06/12,30*12,255000) ? -- SMAlvarez ------------------------------------------------------------------------ SMAlvarez's Profile: http://www.excelforum.com/member.php...o&userid=33287 View this thread: http://www.excelforum.com/showthread...hreadid=560939 |
#5
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PMT question
SMAlvarez wrote:
Ok so the "the monthly payment" is 30*12*PMT(.06/12,30*12,255000)? and "the total amount paid in 30 years" is $300,000? and "total interest paid" - whatever 300,000 - 255,000 is? Is that true? No. SMAlvarez wrote later: maybe im wrong. Is the monthly payment whatever the answer is to PMT(.06/12,30*12,255000) Yes, with the caveats that I mentioned in an earlier posting. The monthly payment is probably either PMT(6%/12,30*12,255000) or PMT(RATE(12,0,-1,1+6%),30*12,255000), depending on what your teacher meant by "6% APR". I suspect your teacher did mean "6% annual interest rate". In that case, your formula is correct. (Note that .06/12 is the same as 6%/12.) I had said that 30*12*PMT(...) is the total amount paid in 30 years. That is very much more than $300,000. Enter the formula =30*12*PMT(...) into a cell and see the result. And I said that the "total interest paid" is the "total amount paid" minus the principal ($255,000). That is =30*12*PMT(...)-255000. |
#6
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PMT question
Hi. Here's what I get. We first note that the loan is 300000*.85 =
255,000. Total payments are 12*30 = 360. =PMT(6%/12,360,-Loan) $1,528.85 Over 30 years, you would have payed: $1528.85 * 360 = $550,387.38 At the end of 30 years, you paid back the loan...everything else went to interest. $550,387.38 - Loan = $295,387.38. (Total Interest) The total interest after 30 years can be checked with =CUMIPMT(6%/12,360,Loan,1,360,0) ($295,387.38) Which checks ok. :) -- HTH. :) Dana DeLouis Windows XP, Office 2003 "SMAlvarez" wrote in message ... maybe im wrong. Is the monthly payment whatever the answer is to PMT(.06/12,30*12,255000) ? -- SMAlvarez ------------------------------------------------------------------------ SMAlvarez's Profile: http://www.excelforum.com/member.php...o&userid=33287 View this thread: http://www.excelforum.com/showthread...hreadid=560939 |
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