Mann Co. is preparing an Excel spreadsheet for its 5-year, 6%, $400,000 installment notes. The notes were issued on January 1 for $421,236. Installment payments are payable each December 31. A portion of the spreadsheet appears as follows: A B C D E 1 Effective rate: 0.06 2 Cash payments: 100,000 3 Term to maturity in years: 5 4 5 Period Cash Payment Interest Expense Change in Balance Outstanding Balance 6 0 7 1 8 2 What formula should Mann use in cell E8 to calculate the outstanding balance (book value) of the notes after the second interest

Note: The data in this question are merged together. They are therefore sorted before answering the question. See the attached excel file for the complete question with the sorted data.

The explanation of the answer is now given as follows:

The correct formula that Mann should use in cell E8 is =E7-D8. If this formula is used, it will calculate the outstanding balance (book value) of the notes after the second interest for period 2.

Additional Note:

Although this is not part of the requirement of the question, but it is provided for you to assist your further in your learning.

Note: See the below the attached excel file for the full answer and calculations of all the cells required for the amortization schedule.

For example, using the correct formula =E7-D8 in cell E8 gives $267,301 (in red color).