You wish to purchase an apartment at a cost of $175,000.You are able to make a down payment of $35,000 and will borrow $140,000 for 30 years at an interest rate of 7.25%.If you want to find your monthly payment using an Excel spreadsheet,you would enter

Question

Quizplus · Accepted Answer

The formula for calculating monthly payment using PMT function in Excel is PMT(rate, nper, pv, [fv], [type]).

- rate: This is the interest rate per period. Since the interest rate is given as an annual rate, we need to divide it by 12 to get the monthly rate. So, we enter 7.25%/12 or 0.0725/12.
- nper: This is the total number of payment periods. Since we are borrowing for 30 years, we have 30*12 or 360 payment periods.
- pv: This is the present value or the amount of the loan. This is $140,000.
- fv: This is the future value or the amount remaining after the last payment is made. Since we want to pay off the loan in full, this value is 0.
- type: This is the type of payment. If the payment is made at the end of the period, then we enter 0. If the payment is made at the beginning of the period, then we enter 1. Since the payment is made at the end of the period, we enter 0.

Therefore, the correct formula to enter in Excel is =PMT(0.0725/12, 360, 140000, 0, 0), which gives a monthly payment of $957.37.

Option B is the correct formula to enter in Excel.

You Wish to Purchase an Apartment at a Cost of $175,000.You