Fundamentals of Financial Instruments. Sunil K. Parameswaran
target="_blank" rel="nofollow" href="#fb3_img_img_46921c0c-59c4-572c-b14a-5de4573ce590.png" alt="PPMT left-parenthesis 0.048 comma 1 comma 8 comma negative 500000 right-parenthesis equals dollar-sign 52 comma 736.66"/>. For the second period,
IPMT and PPMT can be used with two sets of parameters. We can keep the total number of periods at the initial value, specify the present value as the initial loan amount, and keep changing Per to compute the interest and principal components. For the first installment, Per = 1, and for the nth installment, it is equal to n. The alternative is to re-amortize the outstanding amount at the beginning of each period over the remaining number of periods. Remember that each time we re-amortize, we are back to the first period. Thus, after every payment, we are back to the first period of a loan whose life is equal to the remaining time to maturity, and whose principal amount is equal to the remaining outstanding balance.
NOTE
1 1 To rephrase a famous Microsoft claim, in this case “What You See Is NOT What You Get.”
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