Documente Academic
Documente Profesional
Documente Cultură
Applications of Financial
Functions:
How much you would need to spend on monthly payments
such as mortgage or car payments.
2
PMT Function:
It can be used to calculate the payments for a loan or the
future value of an investment.
Syntax:
= PMT ( rate , nper , pv , fv , type )
Where,
rate: annual interest rate for the loan.
nper: total number of payments to be made on the
investment/loan.
pv: present value or the amount borrowed or & omitted in
case of calculating future value of an investment.
fv: value of the investment at the end of the investment
period & omitted in case of loan payments.
type: indicates when payments are due.
3
Example:
Vivek has decided to take out a loan of Rs1000000 from his
friendly banker. Lets calculate, how much per month is this
going to cost him for 5 years?(interest rate 24%)
4
=PMT(D5,F5,H5)
5
NPER Function
Returns the number of periods for an investment based on
periodic, constant payments and a constant interest rate.
syntax:
=NPER(rate, pmt, pv, fv, type)
6
Example:
For a personal loan of 2,50,000. Sai has agreed to pay
10,000 a month and 5 percent annual interest. How long
would it take to pay off that loan?
Here,
amount of the payments is known.
number of payments is the result.
7
Solution:
8
FV Function:
Returns the future value of an investment based on periodic,
constant payments and a constant interest rate.
Syntax:
=FV(rate,nper,pmt,pv,type)
9
Example:
Imagine that you're saving for a vacation. You would like to
know how much you would have in 12 months, if your
account contained rs5000 to start with and you were to
deposit rs2000 a month, at an annual interest rate of 6
percent.
Given,
interest rate of 6 percent annually is divided by 12 to give a
monthly rate.
number of payments is 12 because you want the result after
12 months.
payment amount is your monthly deposit. entered as -2000.
present value is the amount already in the account, entered
as -5000.
10
11
DB Function:
Returns the depreciation of an asset for a specified period
using the fixed-declining balance method.
Syntax:
=DB(cost,salvage,life,period,month)
Where,
Cost: is the initial cost of the asset.
Salvage: is the value at the end of the depreciation.
Life: is the number of periods over which the asset is being
depreciated.
Period: is the period for which you want to calculate the
depreciation. Period must use the same units as life.
Month: is the number of months in the first year.
12
Example:
13
NPV Function:
Calculates the net present value of an investment by using a
discount rate and a series of future payments (negative
values) and income (positive values).
Syntax:
=NPV(rate,value1,value2, ...)
Rate is the rate of discount over the length of one period.
14
Example:
What is the net present value of periodic payments of 1000,
2000 and 30000 units with a discount rate of 8.75%. At time
zero the costs were paid as -4000 units.
=NPV(8.75%,1000,2000,30000)=4,943.21units. The
net present value is the returned value minus the initial costs
of 4000 units, therefore units.
NPV=943.21
15
Other Financial Functions:
Almost 54 financial functions are available in MS EXCEL
Depreciation Formulas
16