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You just took out a 10-year commercial real estate loan for your business
You just took out a 10-year commercial real estate loan for your business. The loan amount is $250,000 and the interest rate is 3.5%.
How many periods (months) will it take you to pay off $100,000 of the principal of the loan? Round your answer to the closest whole number.
please show how you got the answer using excel
Expert Solution
First we calculate Monthly Payment using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Monthly Payment = ?
Rate = 3.5%/12
NPER = 10 years * 12 months = 120 months
PV = $250,000
FV = 0
Substituting the values in formula:
=pmt(3.5%/12,120,-250000,0)
PMT or Monthly Payment = $2,472.15
Computation of Number of Months using NPER Function in Excel:
=nper(rate,pmt,-pv,fv)
Here,
NPER = Number of Months = ?
Rate = 3.5%/12
PMT = $2,472.15
PV = $250,000
FV = $250,000-$100,000 = $150,000
Substituting the values in formula:
=nper(3.5%/12,2472.15,-250000,150000)
NPER or Number of Months = 53.13 months
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