Identify the correct formula to calculate the cumulative interest paid on a mortgage loan for the second year of the loan (periods 13-24,where rate =9%,nper= 5,present value = $250,000.

Question

Quizplus · Accepted Answer

The formula to calculate the cumulative interest paid on a mortgage loan for a specific period is CUMIPMT(rate, nper, pv, start_period, end_period, type). 
In this case, the rate is 9%, nper is 5 years or 60 months, present value is $250,000, and we want to calculate the cumulative interest paid for the second year of the loan, which corresponds to periods 13-24. 
Therefore, the correct formula is CUMIPMT(.09/12, 5*12, 250000, 13, 24, 0). 
Option B has the correct parameters but the start_period and end_period are inverted, which would result in a negative value for the cumulative interest paid. 
Option C has the wrong sign for the present value, which would lead to a wrong result. 
Option D uses 30/12 as the nper parameter, which does not correspond to the loan term of 5 years or 60 months.

Identify the Correct Formula to Calculate the Cumulative Interest Paid