Question

If we are making quarterly payments every year on a loan and want to calculate PMT(), what do you have to do regarding the interest rate before performing the calculation?

Answer 1

Before performing the calculation for PMT(), you need to convert the annual interest rate to the quarterly interest rate.

Step-by-step explanation:

Before performing the calculation for PMT(), you need to convert the annual interest rate to the quarterly interest rate. To do this, divide the annual interest rate by the number of quarters in a year, which is 4.

For example, if the annual interest rate is 6%, the quarterly interest rate would be 6% / 4 = 1.5%.

Once you have the quarterly interest rate, you can use it in the PMT() formula to calculate the monthly payments.