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Sometimes we want to find out how much of a payment is actually paying back the loan, called the principal, and how much is interest.
To find the Principal Payment, we use the PPMT function.
We’ll write Equals, PPMT, 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 will then receive the amount of money we are paying back, minus the interest for that payment.
We can then copy downward… and see that the total amount payed back for the loan is the same as the original loan.
In this lesson we have gone through the PPMT function, which returns the Principal Payment for the payment of a loan.