Use the appropriate function(s) in Excel to answer the following questions.

**How much would your monthly payment be on a 5-year loan if the following assumptions were true?**

You borrowed $8,200.

The fixed APR on the loan is 4.8%.  Note: A fixed APR is an annual interest rate that does not change during the 5-year period.

You will make equal monthly payments to repay both the loan amount and the monthly interest charges.

You want to completely pay off the loan in exactly 5 years.

 

(Round to the nearest cent, do not include a negative sign)

Note: while this money is "leaving your wallet" the negative sign should not be included in the numeric answer because it is already implied by the word "payment"
 
**What is the total amount that you would pay to the bank over this 5-year period?**

Hint: Be sure to use your rounded answer from the previous step in the calculation of this answer.

 

(Round to the nearest cent, do not include a negative sign)
 
**How much total interest would you have paid to the bank?**


(Round to the nearest cent, do not include a negative sign)
 

We will break down the solution into three parts, corresponding to the three questions you asked. Excel provides specific financial functions to calculate the monthly payment, total amount paid, and total interest.

### 1. **Monthly Payment Calculation**
The formula to calculate monthly payment is:

\[
PMT = \text{PMT}(\text{rate}, \text{nper}, \text{pv})
\]

Where:
- **rate** is the monthly interest rate (APR divided by 12).
- **nper** is the total number of payments (5 years × 12 months).
- **pv** is the present value or loan amount, $8,200 in this case.

#### Given Data:
- Loan amount $ \text{pv} = 8,200 $
- APR (Annual Percentage Rate) = 4.8%
- Loan term = 5 years (i.e., $ 5 \times 12 = 60 $ months)

In Excel:
```excel
=PMT(4.8%/12, 60, 8200)
```
This formula calculates the monthly payment. We will round the result to the nearest cent.

### 2. **Total Amount Paid**
The total amount paid to the bank is the monthly payment multiplied by the number of months (5 years × 12 months).

In Excel:
```excel
=Monthly_Payment * 60
```

### 3. **Total Interest Paid**
The total interest paid is the total amount paid to the bank minus the original loan amount.

In Excel:
```excel
=Total_Amount_Paid - 8200
```

### Conclusion:
After calculating:
1. Monthly payment using the `PMT` function.
2. Total amount paid by multiplying the monthly payment by 60.
3. Total interest paid by subtracting the loan amount from the total payment.

Let me know if you'd like further details, or if you want me to help compute these answers using a specific tool.

---

### Expanding Questions:
1. How would the monthly payment change if the loan term were 3 years instead of 5 years?
2. How does an increase in APR affect the monthly payment and total interest paid?
3. What would happen to the total interest paid if the APR was lowered to 3%?
4. Can you calculate how much of your first payment goes toward interest versus the principal repayment?
5. What if the monthly payment was fixed; how could you adjust the loan term to match that?

#### Tip:
In Excel, you can also use the **IPMT** and **PPMT** functions to calculate how much of each payment goes toward interest and how much toward principal.

Use the appropriate function(s) in Excel to answer the following questions.

How much would your monthly payment be on a 5-year loan if the following assumptions were true?

You borrowed $8,200.

The fixed APR on the loan is 4.8%. Note: A fixed APR is an annual interest rate that does not change during the 5-year period.

You will make equal monthly payments to repay both the loan amount and the monthly interest charges.

You want to completely pay off the loan in exactly 5 years.

(Round to the nearest cent, do not include a negative sign)

What is the total amount that you would pay to the bank over this 5-year period?

Hint: Be sure to use your rounded answer from the previous step in the calculation of this answer.

(Round to the nearest cent, do not include a negative sign)

How much total interest would you have paid to the bank?

(Round to the nearest cent, do not include a negative sign)

Learn how to calculate the monthly payment, total amount paid, and total interest for a 5-year loan using Excel functions. This tutorial covers essential financial concepts and Excel formulas like PMT, providing step-by-step guidance for calculating payments on a $8,200 loan with a 4.8% fixed APR.

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