Business > QUESTIONS & ANSWERS > BUSINESS C268: Practice Exam Questions and Answers (GRADEDA+) (All)

BUSINESS C268: Practice Exam Questions and Answers (GRADEDA+)

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Amortization Scenario: You have decided to purchase a new car. You plan to take out a loan to pay for the car. The loan amount is $18,900. You will pay an interest rate of 6.5% and plan to pay off the car in 48 months. You want to calculate the total amount of money and the total amount of interest you will pay over the course of the loan. To help you with these calculations, you decide to construct an amortization table. An amortization table provides details about the payment, interest amount, principal amount, and loan balance for every month of the loan. Perform the tasks below to complete the amortization table and loan summary calculations. 1. Calculate the payment amount for the loan in cell C15. Reference the cells containing the appropriate loan information as the arguments for the function you use. Cells C20–C67 in the "Payment" column are populated with the payment amount from cell C15. =PMT(C13/12,C12,C11) 2. Calculate, in cell D20, the interest amount for period 1 by multiplying the balance in period 0 (cell F19) by the loan interest rate (cell C13) divided by 12. Dividing the interest rate by 12 results in the monthly interest rate. This formula is reusable. The interest for a given period is always the monthly interest rate times the balance from the previous period. =F19*0.65/12 3. Copy the interest amount calculation down to complete the "Interest" column of the amortization table. Ctrl + c then double click the bottom right corner 4. Calculate, in cell E20, the principal amount for period 1. The principal amount is the difference between the payment amount (cell C20) and the interest amount (cell D20) for period 1. Construct your formula in such a way that it can be reused to complete the "principal" column of the amortization table. =C20-D20 5. Copy the principal amount calculation down to complete the "principal" column of the amortization table. Ctrl + c then double click the bottom right corner 6. Calculate, in cell F20, the balance for period 1. The balance is the difference between the balance for period 0 (cell F19) and the principal amount for period 1 (cell E20). This formula is reusable. The balance is always calculated as the difference between the balance from the previous period and the principal amount for the current period. =F19-E20:E20

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