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Copyright © 2011 by Pearson Education Inc. publishing as Prentice Hall. All rights reserved.From Skills for Success with Microsoft® Excel 2010 Comprehensive

Work with Data and Audit Formulas | Microsoft Excel Chapter 7 More Skills: SKILL 11 | of 5

� Amortization tables track loan payments for the life of a loan.

� Each row in an amortization table tracks how much of a payment is applied to the principal—the amount owed—and how much is applied to the interest—the cost of the loan.

To complete this workbook, you will need the following file:� e07_Loan_Amortization

You will save your workbook as:� Lastname_Firstname_e07_Loan_Amortization

1. Start Excel, and open the student data file e07_Loan_Amortization. Save the file in yourExcel Chapter 7 folder with the name Lastname_Firstname_e07_Loan_AmortizationAdd the file name in the worksheet’s left footer. Return to Normal view.

2. Select cell B10. Display the Formulas Tab, and in the Function Library group, clickFinancial, and then click PMT.

The PMT function calculates the payment amount required to pay off a loan for agiven amount, a given number and frequency of payments, and a given interest rate.

ExcelCHAPTER 7

More Skills 11 Create Amortization Tables



3. In the displayed Function Arguments dialog box, in the Rate box, type B7/12 Press FGH. Withthe insertion point in the Nper box, click cell B9, and then press FGH. With the insertion pointin the PV box, click cell B6. Click OK, and then compare your screen with Figure 1.

The payment amount is displayed in red, indicating that the value is negative—an outflow of cash. Because payments are made each month, the interest rate is divided by12 to convert the annual rate to a monthly rate.

Figure 1

PMT amount

Annualinterest rate

4. Select cell B15, type =-B10 and then press 4 to change the cell reference to an absolutereference.

The amount displayed in cell B15 is the monthly payment converted to a positivenumber. Because the monthly payment will refer to the value in cell B15 for every rowof the amortization table, the reference needs to be an absolute cell reference so that itdoes not change when the formula is copied to the other rows.

5. Press F, and in cell C15, type =E14*$B$7/12 and press F.

The interest payment is equal to the current balance multiplied by the monthly interestrate. The interest rate is an absolute cell reference so that the formula always refers tothe value in cell B7 when the formula is copied to other rows.

6. Select cell D15, type =B15-C15 and then press F.

The amount of a payment applied to the principal is the payment minus the amountthat is applied to interest.

7. With the insertion point in cell E15, type =E14-D15 Press F, and then compare yourscreen with Figure 2.

The new balance is equal to the previous balance minus the payment amount appliedto the loan principal.



Figure 2

Monthly payment

Amount appliedto interest

Amount appliedto the principal

New balance

8. Select the range B15:E15, and then drag the fill handle down to row 86.

Row 86 shows that for the last payment, the interest charge $3.46, $734.91 is applied tothe principal, and the remaining balance is $(0.00).

9. Select cell B87. Display the Home tab, and in the Editing group, click AutoSum, and thenpress F. Use the fill handle to fill the formula in cell B87 across to cell D87. Selectcolumns A:E, and AutoFit the column widths. Compare your screen with Figure 3.

Row 87 indicates that for the life of the loan, a total of $53,162.48 will be paid, and thatthe cost of the loan—the interest payments—is $8,162.48.



Figure 3

Totals calculated

10. Select the range A13:E87, and display the Home tab. In the Styles group, click Format asTable, and then under Medium, click Table Style Medium 10—the third style in the secondrow. On the Format As Table dialog box, verify that the My table has headers check box isselected, and then click OK.

11. With the Excel table still selected, on the Design tab, in the Tools group, click the Convertto Range. Read the message, and then click Yes.

12. Press C + gh to return the insertion point to cell A1. Compare your screen with Figure 4.

13. Save your workbook, and then print or submit the file as directed by your instructor.Exit Excel.

� You have completed More Skills 11



Figure 4

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