This preview shows page 1. Sign up to view the full content.
Unformatted text preview: if the payment is made at the beginning or end of the period. The quickest way to access this
formula is by clicking on the Fx of the formula entry window and ask for “PMT” (Payment). Excel will
present you with the “PMT” (Payment) dialog box which looks like the box presented later in this section.
Excel requires the interest to be expressed in the same manner as the periods and the periods are
determined by the compounding feature of the loan. If the interest rate is 12% annually but compounded
monthly you can enter 12%/12 or 1%. The entry of 12%/12 should be considered safest since you do not
have to do math outside the formula to
determine values like 9 3/8% interest
compounded quarterly, you can enter it
as 9 3/8%/4, as shown, rather than
calculate it out as 0.0234375 in
decimal. You can use parentheses such
as (9 3/8%)/4 to ensure the results.
And, Excel will take the generated
value to appropriate significant digits
without interference or limitation.
Since the loan is a 10year loan with
quarterly payments you can enter 10*4
into the Nper or number of periods
window. The principle amount is
entered in the Pv window. As typical
with Excel, no dollar signs or commas
are appropriate. Page 94 Solving Accounting Principles Problems Using Excel for Windows
Clue: The cash flow direction of the principle is important to Excel. If you enter a positive value into
principle value that indicates you are getting the principle and making the payments. As such, the
payments will become a negative value indicating cash flows out. If you enter the principle value as a
negative number that indicates you are making a loan to someone and the principle is cash out so
payments will be positive indicating cash in. In the screen print of the Payments dialog box, the formula
results appear to be a negative 387.9278455 so Excel is indicating that the loan is to you and you are
going to make payments of $387.93 at the end of each payment period since the type box contains no
declaration and will default to “0” – payment at the end of the period. Had the principle value been
nega...
View
Full
Document
This note was uploaded on 09/19/2010 for the course ACCT 220 taught by Professor Ullmann during the Fall '10 term at University of Nebraska Kearney.
 Fall '10
 Ullmann
 Accounting

Click to edit the document details