Answered: Describe the Financial Functions to…

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Economics

Describe the Financial Functions to determine a Loan's Principal andInterest Payments between two Payment Periods?

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter4: Going Into Debt

Section: Chapter Questions

Problem 13AA

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

Describe the Financial Functions to determine a Loan's Principal and
Interest Payments between two Payment Periods?

Expert Solution

Step 1

The financial function that determine loan’s principal amount is PPMT. This function is used to calculate principal amount of loan payment.

The syntax of PPMT is

=PPMT(rate, per, nper, pv, [fv], [type])

Here

Rate: The interest rate per period.

Per: the payment period of interest.

Nper: total number of repayment of loan.

pv: The present value of all payment.

Fv: The cash balance desired after last payment is made.

Type: When payment is due 0=end of the period, 1=beginning of the period.

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