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6.05 PMT Function Assignment

You have found your dream car. It is available at three different dealerships. Each dealership offers a different payment plan (see below). Use the PMT function (instructions) to determine monthly payments for each, then answer the following questions. Submit your PMT sheet and the answers to the 6.05 PMT Dropbox.

|Dealership |Price |Interest Rate |Length of loan |

|B |16,500 |6 |3 years |

|C |15,500 |7 |4 years |

|D |16,000 |5 |5 years |

1.  Which payment plan will cost you the least total money? Include the total cost.

2. Which payment plan offers the smallest monthly payment? Include the monthly payment in your answer.

3. If you are struggling to meet your bills, which dealership should you select? Explain why.

4. If you are comfortable meeting all monthly payments, which should you select? Explain why.

5.       Explain in your own words how you could use the PMT function in your daily life.

PMT Function Instructions

1. Open a spreadsheet program (Excel or Open Office)

2. Type the following words in the designated cell (be sure the cell addresses are correct because you will refer to those cells in the function that is provided)

a. In A1, type Loan Payment Calculator

b. Skip Line 2

c. In A3, type Rate Per Year

d. In A4, type Years of Loan

e. In A5, type Loan Amount

f. In A6, type Monthly Payment

g. In A7, type Total Payment

3. Format and make Column A wider so above is easier to read

4. You will use Column B to enter numbers and the PMT function for dealer 5

5. Here are your loan details:

a. In B3, type the interest rate (6)

*Note: Format B3 as Percentage

b. In B4, type the length of the loan (3)

c. In B5, type the cost of the car (16500)

* Format as Currency

6. Now you will type in the PMT function into cell B6—this will determine your monthly payment based on the loan information you just entered. Are you ready? Here is how you must type in the PMT function:

=PMT(B3/12,B4*12,-B5)

7. Now, we will figure out the total payment for the car by multiplying the monthly payment by the number of months you pay the loan. In cell B7, enter =B4*12*B6.

8. In Column C, enter the loan details for dealer C. Repeat in Column D for dealer D.

a. Remember to format the interest rates in row 3 as Percentages.

b. Remember to format rows 5-7 as currency.

c. Use the fill handle to copy the functions and formulas to the appropriate columns.

9. For bonus, determine the formula you would use to calculate how much extra you pay for the car in interest at each dealer. In A8, type “Bonus.” Enter the formula in row 8 to show this calculation.

10. Save your spreadsheet, and turn it into 6.05 PMT Function Dropbox.

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