Final answer:
The PPMT function only calculates the principal portion of a loan payment, not the total monthly payment. For a loan like the described $300,000 at 6% over 30 years, larger monthly payments would decrease the total interest paid and shorten the loan term.
Step-by-step explanation:
The statement that the PPMT function calculates the monthly principal and interest payment of a loan or investment is false. The PPMT function specifically calculates the principal portion of a loan payment for a given period, given the loan's constant interest rate and constant scheduled payment amount over a specified term. It does not include the calculation of the interest payment.
To calculate the monthly payment for a $300,000 loan with a 6% annual interest rate, convertible monthly over 30 years, you can use the formula for the present value of an annuity:
PV = R * [1 - (1 + i)^(-n)] / i
Where PV is the present value ($300,000), R is the monthly payment, i is the monthly interest rate (0.06 / 12), and n is the total number of payments (360).
Making larger payments by a fraction of 12, effectively making 13 payments a year, reduces the amount of interest paid over the life of the loan and shortens the loan period, saving both time and money. Real-world loan calculations can become complex due to changing interest rates and borrower risk.