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Excel Functions

This document provides an outline for a lecture on evaluating financial information using Excel. It will review Excel functions for time value of money calculations, including functions for present and future value, internal rate of return, loan amortization schedules, and converting between nominal and effective interest rates. Students are expected to be familiar with basic Excel skills before the lecture. The lecture will demonstrate various financial calculations and TVM functions using Excel spreadsheets. An assignment and quiz assessing Excel skills are due in following weeks.

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julie
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79 views

Excel Functions

This document provides an outline for a lecture on evaluating financial information using Excel. It will review Excel functions for time value of money calculations, including functions for present and future value, internal rate of return, loan amortization schedules, and converting between nominal and effective interest rates. Students are expected to be familiar with basic Excel skills before the lecture. The lecture will demonstrate various financial calculations and TVM functions using Excel spreadsheets. An assignment and quiz assessing Excel skills are due in following weeks.

Uploaded by

julie
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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ACST101-Finance 1A

WEEK 4 “EXCEL FUNDAMENTALS (REVIEW) & EXCEL TVM FUNCTIONALITY”

Learning Outcome 5: Evaluate financial information using a spreadsheet.

Lecture - Outline

1. Assumed Excel Knowledge


2. Video: Loan Amortisation
3. Review: TVM functions in Excel using the
amortisation schedule on iLearn.
- Demo functions

3. Other Time Value of Money (TVM) Functionality


using week 3 spreadsheets to demo
a) PV and FV Calculations (single amount)
b) NPV
c) Nominal and Effective Rate Conversion
d) FV and PV Ordinary Annuity vs Annuity Due

1
1. Assumed Excel Knowledge

 As you would have seen in the Week 1, Week 2 and Week 3 lectures
on the topic TVM, we have included customised Excel spreadsheets to
accompany many of the examples and illustrations shown in the
lecture notes.

 The point of introducing Excel spreadsheet techniques from Week 1 in


this introductory unit in finance is this. In the finance professions, we
tend to use Excel spreadsheets to support evaluation of financial
information.

 Therefore, if you have not already done so, check out and familiarise
yourself with the KickStart Excel Tutorials

1. Assumed Excel Knowledge (Cont’d)

 If you are a novice at Excel, try a few basic tutorials (available


through youtube…or see ilearn under Links for Student page) to
become more familiar with the environment, and how operate
Excel.

 Remember, Excel is just like a very powerful calculator that uses a


large grid (columns and rows) to store data, and uses commands
(formula), instead of arithmetic operands on a keyboard, to work the
data.

 Like with a calculator, you need to tell Excel what to do, placing
data in rows and columns, and inserting formulae in specific cells
instructing Excel in what ways you wish to manipulate the data to
obtain sought answers.

2
1. Assumed Excel Knowledge (Cont’d)

 As it pertains to your situation, in KickStart, click either the Mac or


PC link choosing a tutorial that covers the general skill level or
specific skill that you seek to attain.

 Alternatively, try Excel Help at Microsoft Office


(supportofficeexcel).

 Either way, we expect that as a minimum you have completed the


above suggested basic skill development before attending the
lecture.

2. Review: Week 3 Excel Spreadsheets

1. Intro Video:
Amortising a loan…an extension of the Kickstart series.
2. Demo TVM Excel functions using the Amortisation schedule
Annuity Calculations (components of the annuity) To force a positive
i. FV(rate,nper,pmt,[pv],[type])
value, use a
ii. NPER(rate,pmt,pv,[fv],[type])
negative in front of
iii. PMT(rate,nper,-pv,[fv],[type]) PV or Pmt (cash
iv. PV(rate,nper,pmt,[fv],[type]) inflow cash outflow
v. RATE(nper, pmt, pv, [fv], [type], [guess]) match in Excel)
Loan Amortisation (special functions)
i. -CUMIPMT(rate,nper,pv,start_period,end_period,type)
ii. -CUMPRINC(rate,nper,pv,start_period,end_period,type)
iii. IPMT(rate, per, nper, pv, [fv], [type])
iv. PPMT(rate,per,nper,pv,[fv],[type]) =-CUMPRINC and
=-CUMIPMT [don’t use
negative PV].

3
3. Time Value of Money (TVM) Functionality
3. Other TVM functions (refer Week 4 Added excel spreadsheets)
a) Can we use =PV(), =FV(), =RATE(), =NPER() if it’s a single cash flow
that we want to discount or compound? Demo examples from Week 4
added spreadsheet (2)
b) NPV(rate,value1,[value2],...) Demo 6.2; Example 6.1

c) Nominal and Effective Rate Conversion


i. EFFECT(nominal_rate,npery)… p208 example
ii. NOMINAL(effect_rate,npery)…Demo 6.8
d) FV Ordinary Annuity and Annuity Due
e) PV Ordinary Annuity and Annuity Due

3. Time Value of Money (TVM) Functionality (Cont’d)

TVM functions (in Excel click on the formula bar icon fx) listed below return the:
a) NPV
NPV(rate, value 1, [value 2],…) present value of a range of cash flow values
b) PV and FV Calculations
i. FV(rate,nper,pmt,[pv],[type]) future value of an investment.
ii. NPER(rate,pmt,pv,[fv],[type]) number of periods for an investment.
iii. PMT(rate,nper,pv,[fv],[type]) periodic payment for an annuity.
iv. PV(rate,nper,pmt,[fv],[type]) present value of an investment.
v. RATE(nper,pmt,pv,[fv],[type],[guess]) interest rate per period of an annuity.
vi. NPV(rate, value 1, [value 2],…) present value of a range of cash flow values

c) Nominal and Effective Rate Conversion


i. EFFECT(nominal_rate,npery) effective annual interest rate (EAR) given the
nominal annual interest rate and the number of compounding periods
(events) per period (year).
ii. NOMINAL(effect_rate,npery) nominal annual interest rate, given the EAR and
the number of compounding periods (events) per period (year).

8a

4
3. Time Value of Money (TVM) Functionality (Cont’d)

c) Loan Amortisation

TVM functions (in Excel click on the formula bar icon fx) listed below return the:

i. -CUMIPMT(rate,nper,pv,start_period,end_period,type) cumulative interest paid


on a loan between start and end periods.
ii. -CUMPRINC(rate,nper,pv,start_period,end_period,type) cumulative principal
paid on a loan between its start and end periods.
iii. IPMT(rate,per,nper,pv,[fv],[type]) interest payment for a given period, for an
investment based on periodic, constant payments and a constant
interest rate.
iv. PPMT(rate,per,nper,pv,[fv],[type]) payment on the principal for a given period,
for an investment based on periodic, constant payments and a constant
interest rate.

8b

What’s next?
Prac Sets Week 4 Online
 Complete: Available on iLearn. Practice Sets are under week 4 page and are not
assessable.

Tutorial 4 (Held in Week 5)


 Excel tute exercise…attempt prior to the tute. Come prepared to ask
questions.

Week 5
 Read: Lecture slides (available on iLearn in the Week 5 Tab).
 Other: Review the Week 4 lecture, and replicate the KickStart Excel tutorials and
Week 4 tutorial

Excel Assignment and Quiz (2 components worth 12% of course


marks)
 Complete the Quiz: Available on iLearn under Online Assessable Quizzes page.
Note: This quiz is assessable (5%). You need Excel access.
 Complete the Assignment (7%) requiring you to prepare a spreadsheet and submit.

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