excel loan amort interest help URGENT!
i'm doing a loan amort for $1,000,000 at 4% annually compounded monthly over 1 year.
why does the total interest turn out to be less that simple 4% on $1,000,000?
below is the payment number followed by start balance, payment, interest, principal reduction, then balance after payment 1.00 $1,000,000.00 ($85,183.79) $3,395.13 $81,788.66 $918,211.34 2.00 $918,211.34 ($85,183.79) $3,117.45 $82,066.34 $836,145.00 3.00 $836,145.00 ($85,183.79) $2,838.82 $82,344.97 $753,800.03 4.00 $753,800.03 ($85,183.79) $2,559.25 $82,624.54 $671,175.49 5.00 $671,175.49 ($85,183.79) $2,278.73 $82,905.06 $588,270.43 6.00 $588,270.43 ($85,183.79) $1,997.25 $83,186.53 $505,083.89 7.00 $505,083.89 ($85,183.79) $1,714.82 $83,468.96 $421,614.93 8.00 $421,614.93 ($85,183.79) $1,431.44 $83,752.35 $337,862.58 9.00 $337,862.58 ($85,183.79) $1,147.09 $84,036.70 $253,825.88 10.00 $253,825.88 ($85,183.79) $861.77 $84,322.02 $169,503.86 11.00 $169,503.86 ($85,183.79) $575.49 $84,608.30 $84,895.56 12.00 $84,895.56 ($85,183.79) $288.23 $84,895.56 $(0.00)
this is because you're reducing your balance over the year... it's 4% per year but you never accrue the full 4% over the year as you're amortizing it...
thank you, I just figured that out too. too easy to miss the obvious
Nostrum et ex veniam ipsum. Error sit provident deleniti aut sit maiores. Illum voluptate quod pariatur est adipisci in. Doloribus necessitatibus vel ut impedit esse eius necessitatibus. Rerum nulla sapiente adipisci ut. Velit vitae commodi blanditiis rem. Est quae vel mollitia sint occaecati.
Beatae et ex aut consequatur molestiae ea ducimus. Voluptatem consequuntur nulla tempora aut fugit. Aut itaque consequuntur harum aut enim.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...