Can someone please explain to me how the interest payment was determined? I am doing this N = 30*12=360 I/Y = 7/12 = .5833% FV = 0 PV = -32,000,000 PMT = 212,889 Interest per year = 212,889*12 = 2,554,658 The solutions have 2,240,000. Any thoughts?
The PMT includes both interest and principal. 32,000,000* 7% = 2,240,000 is the interest for one year based on 7% per year.
Use the AMORT function on your calculator
Thanks guys appreciate it!
notice, its not an annuity - there are no amortizations -> very easy: 0,07*32000000
It’s a loan that is being paid off, so there is amortisation. They have calculated the first month’s interest payment, then multiplied it by 12. The actual interest paid over the first year is 2,229,702.
I forget what test this was on (it seems similar), but the loan in question is an interest only loan.