## Explanation

For this example, we want to calculate the principal portion for payment 1 of a 5-year loan of $5,000 with an interest rate of 4.5%. To do this, we set up PPMT like this:

**rate** - The interest rate per period. We divide the value in C6 by 12 since 4.5% represents annual interest:

```
=C6/12
```

**per** - the period we want to work with. Supplied as 1 since we are interested in the principal amount of the first payment.

**pv** - The present value, or total value of all payments now. In the case of a loan, this is input as a negative value by adding a negative sign in front of C5 to supply -5000.

With these inputs, the PPMT function returns 74.465, which is automatically rounded to $74.47 when the Currency number format is applied.