Chapter 16, Problem 1ES

To determine

To calculate: The monthly payment for a mortgage amount of $\$287,500$ at $5.75\%$ annual interest rate for 20 years using an Excel function.

Answer to Problem 1ES

Solution:

The monthly payment for a mortgage amount of $\$287,500$ at $5.75\%$ annual interest rate for 20 years is $\underset{\_}{\$2,018.49}$.

Explanation of Solution

Given Information:

A mortgage amount of $\$287,500$ at $5.75\%$ annual interest rate for 20 years.

Formula used:

To find the monthly payment for the given mortgage amount using an Excel Function, follow the steps given below:

1. Open MS Excel, go to Formulas, then Financial and then choose PMT.

2. Enter the values of annual interest rate in ‘Rate’, number of payments in ‘Nper’, mortgage amount in ‘PV’. Enter 0 for FV and Type or leave them blank.

3. Finally, press Ok to get the required value.

Calculation:

It is required to find the monthly payment for a mortgage amount of $\$287,500$ at $5.75\%$ annual interest rate for 20 years using an Excel function.

Follow the following steps:

Step1: Open MS Excel, go to Formulas, then Financial and then choose PMT.

Step2: Enter the following values: $\text{Rate}=5.75\%/12,\text{Nper}=20*12,\text{Pv}=287500$ and enter 0 for FV and Type.

This will give the required value as shown below:

Hence, the monthly payment for a mortgage amount of $\$287,500$ at $5.75\%$ annual interest rate for 20 years is $\$2,018.49$.