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Topic 1: Using Financial Functions

When and how to use CUMPRINC function? Please explain and give an example?

The CUMPRINC function is used when computes the principal paid between two periods
(inclusive).

The syntax of the CUMPRINC function is


=CUMPRINC(rate,#per,pv,start_period,end_period,type).

The CUMPRINC function uses the following arguments:

Rate is the interest rate per period. For example, if you borrow money at 6 percent per year
and the period is a year, then rate = 0.06. If the period is a month, then rate = 0.06/12 =
0.005.

#per is the number of periods in the annuity. For this copier example, #per = 5. If payments
on the copier are made each month for five years, #per = 60. Your rate must, of course, be
consistent with #per. That is, if #per implies a period is a month, you must use a monthly
interest rate; if #per implies a period is a year, you must use an annual interest rate.

.
PV (required argument) – This is the Present Value of the loan/Investment.

Start_period (required argument) – The number of the first period over which the interest is
to be calculated. It needs to be an integer between 1 and the specified NPER.

End_period (required argument) – The last period over which interest is to be calculated. It
must be an integer between 1 and the specified NPER.

Type is either 0 or 1 and indicates when payments are made. When type is omitted or equal
to 0, payments are made at the end of each period. When type = 1, payments are made at the
beginning of each period. Note that you may also write True instead of 1 and False instead
of 0 in all functions discussed in this chapter.

How to use the CUMPRINC Function in Excel?


To understand the uses of the CUMPRINC function, let us consider a example:

. In cell C7, compute the principal paid off in months 2 through 4 ($2,950.08) by using the
=CUMPRINC(0.08/12,10,10000,2,4,0) formula

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