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In this video tutorial, the process of creating an amortization schedule is explained using a mortgage example. The principal amount is set at $300,000 for a 30-year term at an annual interest rate of 5%, starting on July 1, 2020. The tutorial specifies that the number of payments, located in cell D1, is calculated as 30 years multiplied by 12 months, resulting in 360 monthly payments. The monthly interest rate is derived by dividing the annual rate by 12, using the value in cell B3. To determine the monthly mortgage payment, the PMT function is utilized, starting with the monthly rate indicated in cell D2.