Step-by-Step Guide on How to Use the CUMIPMT Function in Excel

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This guide will provide a step-by-step solution on how to use the CUMIPMT function in Microsoft Excel. It’s an essential tool for developers looking to analyze the present value of cash flow in interest-bearing accounts.

What is the CUMIPMT Function?

The CUMIPMT function is an Excel Financial function used to calculate the cumulative interest paid for a given period on a loan or investment. It takes six parameters:

1. Rate: The interest rate used to calculate interest.
2. NPer: The total number of payments in a specified period.
3. Pv: The present value of the loan or investment before interest.
4. StartPeriod: The first period in the calculation.
5. EndPeriod: The last period in the calculation.
6. Type: Payment type, either 0 (payment made at the end of the period) or 1 (payment made at the start of the period).

How to Use the CUMIPMT Function in Excel

The CUMIPMT function in Excel is fairly straightforward, although it does contain several parameters. Here’s a step-by-step guide for using the function:

1. Open your spreadsheet in Excel.
2. Enter the six parameters required for the CUMIPMT formula in the correct column.
3. Enter the formula in a cell (or press Fx) to display the result.

=CUMIPMT(rate, nper, pv, startperiod, endperiod, type)

Note that CUMIPMT will return an error if any of the parameters are incorrect or typed in the wrong format.

Examples of the CUMIPMT Function in Excel

Here are two examples of the CUMIPMT function in action.

Example 1

You are evaluating the total interest paid on a loan of $100,000 with a 10% annual interest rate over 10 years. The loan is to be paid off in 120 monthly payments. The first period is month 1 and the last period is month 120.

The formula for this example would look like this:

=CUMIPMT(10%, 120, 100,000, 1, 120, 0)

Example 2

You are evaluating the total interest paid on an investment of $200,000, with a 7% annual interest rate over 5 years. The investment will be paid off in 60 bi-annual payments. The first period is month 1 and the last period is month 60.

The formula for this example would look like this:

=CUMIPMT(7%, 60, 200,000, 1, 60, 1)

FAQs

What is the CUMIPMT Function?

The CUMIPMT function is an Excel Financial function used to calculate the cumulative interest paid for a given period on a loan or investment. It takes six parameters which are rate, nper, pv, startperiod, endperiod and type.

How do I use the CUMIPMT Function?

To use the CUMIPMT function, open your spreadsheet in Excel, enter the parameters required and enter the formula in a cell (or press Fx) to display the result.

What are the parameters for the CUMIPMT Function?

The parameters for the CUMIPMT function are rate, nper, pv, startperiod, endperiod and type.

Are there any examples I can use?

Yes, two examples of the CUMIPMT function are provided in the guide. The first is a loan with a 10% annual interest rate over 10 years, to be paid off in 120 monthly payments. The second is an investment of $200,000, with a 7% annual interest rate over 5 years, to be paid off in 60 bi-annual payments.

What does the CUMIPMT function return?

The CUMIPMT function will return the cumulative interest paid for a given period on a loan or investment.

What happens if I enter a wrong parameter for the CUMIPMT Function?

If you enter an incorrect parameter for the CUMIPMT function, the function will return an error.

Source Links

CUMIPMT function - Microsoft Support

The CUMIPMT function returns the cumulative interest paid on a loan between start_period and end_period.

Microsoft Support