Create the spreadsheet models shown in Figures 6.3 and 6.4.

a. What is the effect of a change in the interest rate from 8% to 10% in the spreadsheet model shown in Figure 6.3?

b. For the original model in Figure 6.3, what interest rate is required to decrease the monthly payments by 20%? What change in the loan amount would have the same effect?

c. In the spreadsheet shown in Figure 6.4, what is the effect of a prepayment of $200 per month? What prepayment would be necessary to pay off the loan in 25 years instead of 30 years?

FIGURE 6.3 Excel Spreadsheet Static Model Example of a Simple Loan Calculation of Monthly Payments.

FIGURE 6.4 Excel Spreadsheet Dynamic Model Example of a Simple Loan Calculation of Monthly Payments and the Effects of Prepayment.