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Sometimes we want to find out how much of a payment is actually paying back the loan, and how much is interest.
To find the interest part of a payment, we use the IPMT function.
Just like for the PPMT function, we’ll write Equals, IPMT, and select the rate. We want this to remain unchanged, so we’ll make this reference absolute.
We’ll then select the payment number to the left, the number of payments, make it absolute, select the Present Value, the amount of the original loan, and make that absolute as well.
We will ignore the future value and type for this lesson.
We then receive the how much the interest is worth for that particular payment. Note that the two numbers together equal the amount of the payment for each period.
If we copy downward, we see how much of each of the twelve payments is Principal, and how much is interest, as well as how much total interest is payed.
In this lesson we have looked at the IPMT function, which returns the interest part of the payment of a loan