In the screen print of the payments dialog box the

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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 10-year 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...
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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.

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