The correct function argument for the PMT function in Excel to calculate monthly loan payments for a $35,000 car loan with a 4.43% annual interest rate, payable over 3 years, is PMT(4.43%/12, 36, -35000). This ensures accurate consideration of the monthly interest rate, payment duration, and loan amount.
Option B is correct.
The PMT function in Excel is commonly used to calculate the monthly payments on a loan. When setting up the function, it's essential to consider the correct arguments.
Interest Rate (rate): The annual interest rate needs to be converted to a monthly rate. Since the loan term is in years, the rate should be divided by 12. Therefore, the correct expression is PMT(4.43%/12, ...).
Number of Payments (nper): For a 3-year loan with monthly payments, the total number of payments is 3 years multiplied by 12 months per year, resulting in 36 payments. Therefore, the correct expression is PMT(4.43%/12, 36, ...).
Present Value (pv): The present value represents the loan amount, which is -$35,000 (negative because it's an outgoing payment). Therefore, the correct expression is PMT(4.43%/12, 36, -35000, ...).
Now, examining the given options:
Option 1: PMT(4.43%, 36, -35000) - Incorrect because the interest rate is not converted to a monthly rate.
Option 2: PMT(4.43%/12, 36, -35000) - Correct, as it incorporates the monthly interest rate, number of payments, and present value.
Option 3: PMT(4.43%/12, 3, -35000) - Incorrect because it only considers a 3-month term instead of 36 months.
Option 4: PMT(4.43%, 3, -35000) - Incorrect because the interest rate is not converted to a monthly rate.