In The Excel Setup Of A Loan Amortization Problem, Which Of The Following Occurs?

 In the Excel setup of a loan amortization problem, several key steps occur:

1. Input Data: The user inputs relevant data such as the loan amount, interest rate, loan term (in months or years), and any additional fees or costs associated with the loan.

2. Calculation of Monthly Payment: Excel calculates the monthly payment using financial functions such as PMT (Payment) function, which determines the fixed monthly payment required to repay the loan over the specified term.

3. Generation of Amortization Schedule: Excel generates an amortization schedule, which is a table that breaks down each loan payment into its principal and interest components. This schedule typically includes columns for the payment number, payment date, total payment, principal payment, interest payment, and remaining balance.

4. Calculation of Principal and Interest Payments: Excel calculates the principal and interest portions of each payment using formulas based on the loan amount, interest rate, and remaining balance. The interest portion is based on the remaining balance multiplied by the monthly interest rate, while the principal portion is the difference between the total payment and the interest portion.

5. Updating Remaining Balance: Excel updates the remaining balance for each period by subtracting the principal portion of the payment from the previous period's remaining balance.

6. Visualization: Excel may also include visual elements such as charts or graphs to help users understand the loan repayment schedule and track the progression of principal and interest payments over time.

Overall, the Excel setup of a loan amortization problem involves inputting data, calculating the monthly payment, generating an amortization schedule, calculating principal and interest payments, updating the remaining balance, and potentially providing visual aids for better understanding.