Microsoft Excel 4B: Mortgages, Monthly Payments, Principal and Interest

Creating an Interest Spreadsheet:

• In LessonA you used the pmt function to calculate the amount of a loan payment.
• In Section3 you used an interest spreadsheet to calculate various interest options for a business loan.
• In this section you will construct a similiar spreadsheet from scratch.
• If you have problems with this spreadsheet you can go back and look at the one in the Lesson3E file, however you are encouraged to follow the steps in this assignment carefully and only look back at Lesson3E if you are stuck with a particular formula.
• Don't simply copy the formulas as you will have tremendous difficulty with the test for this section guarenteed!

Loan Interest:

• You will find through this assignment some things about interest, for example:
  • loan payments are made up of interest and principal
  • each month that you make a payment the amount that is applied towards interest decreases
  • on a long term loan like a 25 year mortgage on a home, you may pay more in interest than you do for the home! (this depends on the interest rate).

• The table below shows what happens to the balance of a $100,000 loan.
• As you can see the loan balance at the end of the first payment is $99,590.22 and the loan balance at the end of the second payment is $99,176.01.
• If you wanted to pay the loan off completely after the 5th payment had been made (assume you inherit some money) you would have to pay the bank $97,906.24

figure4.1.1

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