business mathematics & statistics. lecture 8 compound interest calculate returns from...
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BUSINESS MATHEMATICS
&
STATISTICS
LECTURE 8Compound Interest
Calculate returns from investmentsAnnuities
Excel Functions
Excel Worksheet Functions
• Database• Date and Time• External • Engineering• Financial• Information • Logical• Lookup and Reference• Math and Trigonometry• Statistical• Text and data
Financial Functions
• ACCRINT Returns the accrued interest for a security that pays periodic interest
• ACCRINTM Returns the accrued interest for a security that pays interest at maturity
• AMORDEGRC Returns the depreciation for each accounting period by using a depreciation coefficient
• AMORLINC Returns the depreciation for each accounting period
Continued
• COUPDAYBS Returns the number of days from the beginning of the coupon period to the settlement date
• COUPDAYS Returns the number of days in the coupon period that contains the settlement date
• COUPDAYSC Returns the number of days from the settlement date to the next coupon date
• COUPNCD Returns the next coupon date after the settlement date
Continued
• COUPNUM Return the number of coupons payable between the settlement date and maturity date
• COUPPCD Returns the previous coupon date before the settlement date
• CUMIPMT Returns the cumulative interest paid between two periods
• CUMPRINC Returns the cumulative principal paid on a loan between two periods
Continued
• DB Returns the depreciation of an asset for a specified period using the fixed-declining balance method
• DDB Returns the depreciation of an asset for a specified period using the double-declining balance method or some other method you specify
• DISC Returns the discount rate for a security• DOLLARDE Converts a dollar price, expresed as a
fraction, into a dollar price, expressed as a decimal number
Continued
• DOLLARFR Converts a dollar price, expressed as a decimal number, into a dollar price, expressed as a fraction
• DRUATION Returns the annual duration of a security with periodic interest paysments
• EFFECT Returns the effective annual interest rate• FV Returns the future value of an investement
Continued
• FVSCHEDULE Returns the future value of an initial principal after applying a series of compound interest rates
• INTRATE Returns the interest rate for a fully invested security
• IPMT Returns the interest payment for an investment for a given period
• IRR Returns the internal rate of return for a series of cash flows
CUMIPMT
Returns the cumulative interest paid between two periodsCUMIPMT(rate,nper,pv,start_period,end_period,type)
Rate interest rate.Nper total number of payment periods
Pv present value.Start_period first period in the calculation End_period last
period in the calculationType timing of the payment
EXAMPLE
Data Description9% Annual interest rate30 Years of the loan125,000 Present value(A2/12,A3*12,A4,13,24,0)Total interest paid in the second
year of payments, periods 13 through 24 (-11135.23)(A2/12,A3*12,A4,1,1,0)Interest paid in a single payment in
the first month (-937.50)
CUMPRINC Returns the cumulative principal paid on a loan between
two periods
CUMPRINC(rate,nper,pv,start_period,end_period,type)
Rate interest rate.
Nper total number of payment periods.
Pv present value
Start_period period in the calculation. Payment End_period last period in the calculation
Type timing of the payment
EXAMPLE
Data Description9.00% Interest rate per annum30 Term in years125,000 Present value=CUMPRINC(A2/12,A3*12,A4,13,24,0)The total principal
paid in the second year of payments, periods 13 through 24 (-934.1071
=CUMPRINC(A2/12,A3*12,A4,1,1,0)The principal paid in a single payment in the first month (-68.27827)
EFFECT Returns the effective annual interest rate
EFFECT(nominal_rate,npery)
Nominal_rate nominal interest rate
Npery number of compounding periods per year
EXAMPLE
5.25% Nominal interest rate
4 Number of compounding periods
per year
=EFFECT(A2,A3)
Effective interest rate with the terms above (0.053543 or 5.3543 percent)
FV Returns the future value of an investment
FV(rate,nper,pmt,pv,type)
Rate interest rate per period
Nper total number of payment periods
Pmt payment made each period.
Pv present value, or the lump-sum amount
Type number 0 or 1 due
DataDescription EXAMPLE 1
6% Annual interest rate
10 Number of payments
-200 Amount of the payment
-500 Present value
1 Payment is due at the beginning of the period
=FV(A2/12, A3, A4, A5, A6)Future value of an investment with the above terms (2581.40)FV(rate,nper,pmt,pv,type)
EXAMPLE 2
12% Annual interest rate
12 Number of payments
-1000 Amount of the payment
=FV(A2/12, A3, A4)
Future value of an investment with the above terms (12,682.50)
FV(rate,nper,pmt,pv,type)
EXAMPLE 3
6% Annual interest rate
10 Number of payments
-200 Amount of the payment
-500 Present value
1Payment is due at the beginning of the period =FV(A2/12, A3, A4)
Future value of an investment with the above terms (12,682.50)
FV(rate,nper,pmt,pv,type)
FVSCHEDULE Returns the future value of an initial principal after
applying a series of compound interest rates
FVSCHEDULE(principal,schedule)
Principal present value
Schedule an array of interest rates to apply
FVSCHEDULEFVSCHEDULE(principal,schedule)
Example
=FVSCHEDULE(1,{0.09,0.11,0.1})
Future value of 1 with compound interest rates of 0.09,0.11,0.1 (1.33089)
IPMT
Returns the interest payment for an investment for a given period
IPMT(rate,per,nper,pv,fv,type)
Rate interest rate per period
Per period to find the interest
Nper total number of payment periods
Pv present value, or the lump-sum amount
Fv future value, or a cash balance
Type number 0 or 1
ISPMT Calculates the interest paid during a specific period of an
investment
ISPMT(rate,per,nper,pv)
Rate interest rate
Per period
Nper total number of payment periods Pv present value. For a loan, pv is the loan amount
NOMINAL Returns the annual nominal interest rate
NOMINAL(effect_rate,npery)
Effect_rate effective interest rate
Npery number of compounding periods per year
NPER Returns the number of periods for an investment
NPER(rate, pmt, pv, fv, type)
Rate is the interest rate per period.
Pmt payment made each period
Pv present value, or the lump-sum amount
Fv future value, or a cash balance
Type number 0 or 1 (due)
NPV Returns the net present value of an investment
based on a series of periodic cash flows and a discount rate
PV(rate,nper,pmt,fv,type)
Rate interest rate per period
Nper is the total number of payment periods
Pmt payment made each period
Fv future value, or a cash balance Type number 0 or 1 (due)
PMT Returns the periodic payment for an annuity
PMT(rate,nper,pv,fv,type)Rate interest rate
Nper total number of payments Pv present valueFv future value
Type number 0 (zero) or 1
PPMT Returns the payment on the principal for an
investment for a given period
PPMT(rate,per,nper,pv,fv,type)
Rate interest rate per period.
Per period and must be in the range 1 to nper
Nper total number of payment periods
Pv is the present value
Fv future value (0)
Type is the number 0 or 1 (due)
PV Returns the present value of an investment
PV(rate,nper,pmt,fv,type)
Rate interest rate per period
Nper total number of payment periods in an annuity
Pmt payment made each period and cannot change over the life of the annuity
Fv future value, or a cash balance
Type number 0 or 1 and indicates when payments are due
RATE
Returns the interest rate per period of an annuityRATE(nper,pmt,pv,fv,type,guess)
Nper total number of payment periodsPmt payment made each period
Pv present value Fv future value, or a cash balance (0)
Type number 0 or 1 (due)Guess (10%)
BUSINESS MATHEMATICS
&
STATISTICS