Basic Problem Excel Solution Python Solution Extend & Iterate

Getting Started with Python and Excel

Building a Basic Model in Both Excel and Python

Nick DeRobertis1
1 University of Florida

Department of Finance, Insurance, and Real Estate

June 9, 2021

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Basic Problem Excel Solution Python Solution Extend & Iterate

Table of Contents

1 An Introductory Model

2 Excel Solution

3 Python Solution

4 Extending the Model and Iteration

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Basic Problem Excel Solution Python Solution Extend & Iterate

Approaching a Problem with Two Tools

The focus today is to get

familiar working in both Excel
and Python

We will approach this by

building a simple model with
both tools

In later lectures, we will move to

combining the tools

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Basic Problem Excel Solution Python Solution Extend & Iterate

A Simple Retirement Problem

Let’s take what is perhaps the simplest finance problem, which

everyone should understand

While you may have approached such a problem with a calculator

before, we will build models for it instead

Martha is saving for retirement. She earns $60,000 per year and is
able to save 25% of that. If she invests her savings, earning 5% per
year, and she needs $1,500,000 to retire, how soon can she retire?

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Basic Problem Excel Solution Python Solution Extend & Iterate

Breaking Down the Retirement Problem

A General Structure

Inputs Process Outputs

Real-world Problem

Cash in the
Wages, Savings Investment bank, person
retires

A Model of the Problem

Cash Flows, Savings FV of CF, time
Model
Rate, Interest Rates until retirement
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Basic Problem Excel Solution Python Solution Extend & Iterate

Table of Contents

1 An Introductory Model

2 Excel Solution

3 Python Solution

4 Extending the Model and Iteration

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Basic Problem Excel Solution Python Solution Extend & Iterate

Solving the Problem in Excel

It is easy to use Excel as a

calculator and just type the
math in directly. But we want
to build a model.
Changing inputs should result in
a change to outputs. The way
to do this in Excel is cell
references
Fixed references become
important when trying to drag
formulas, e.g. $A$2 (fully fixed),
$A2 (fixed on column), or A$2
(fixed on row).

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Basic Problem Excel Solution Python Solution Extend & Iterate

Simple Retirement Problem in Excel

Intro Excel Exercise

Go to the course site and download Simple Retirement Model Excel
Follow along as I recreate the simple model.

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Basic Problem Excel Solution Python Solution Extend & Iterate

Table of Contents

1 An Introductory Model

2 Excel Solution

3 Python Solution

4 Extending the Model and Iteration

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Basic Problem Excel Solution Python Solution Extend & Iterate

How We’ll Work in Python

Using Python in the terminal is

kind of a pain. And so, tools were
born.

Jupyter is a graphical interface we

can use for Python. It also
supports over 40 other languages
such as R, SAS, Julia, and Scala

You can use jupyter notebook or

jupyter lab. The latter has a lot
more features outside of the
notebook. We will focus on using
jupyter lab in this class as it is
the future of Jupyter.

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Basic Problem Excel Solution Python Solution Extend & Iterate

Let’s Get Set up with Jupyter

Launch Jupyter Notebook

1 Launch Anaconda Navigator
2 Find Jupyter Notebook on the main screen, and click launch
3 You should see a list of folders and files. Click New and then Python 3
4 Now you should see a code cell with In [ ]: next to it

If you don’t have Anaconda Navigator, just open a terminal (search cmd
on Windows, terminal on Mac). Then in the terminal, type jupyter
lab and enter. Then continue with the third step.

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Basic Problem Excel Solution Python Solution Extend & Iterate

Some Python Basics

In Excel, the basic unit is a cell. In Python, the basic unit is an object.

In Excel, content in a cell is either a number (123) or a string (ABC)

In Python, all objects have types. They might also be a number or a

string, or something else.

Rather than using a cell reference like $A$2, we assign names to

objects in Python

my_number = 6
my_string = 'ABC'

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Basic Problem Excel Solution Python Solution Extend & Iterate

Doing Some Math in Python

Basic operations in Python are

straightforward
2 + 5 = 7
6 - 2 = 4

Note: Deprecation warning 2 * 3 = 6

In the future, these numpy financial 5 / 2 = 2.5
functions are being moved to a separate
package numpy_financial. For the A lot more is available using the
purposes of this class, this won’t matter, numpy package
but in the future you may have to install
numpy_financial to use these functions.
np.pv, np.nper,
In the meantime, you will see a warning np.fv, np.pmt
come up when calling the functions.
All numpy financial functions

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Basic Problem Excel Solution Python Solution Extend & Iterate

Simple Retirement Problem in Python

Intro Python Exercise

Go to the course site and download Simple Retirement Model Python
In Jupyter, then navigate to your Downloads folder (or wherever you
saved it)
You should then see Simple Retirement Model.ipynb come up in the
list of files in Jupyter. Click it to open it and follow along.

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Basic Problem Excel Solution Python Solution Extend & Iterate

Table of Contents

1 An Introductory Model

2 Excel Solution

3 Python Solution

4 Extending the Model and Iteration

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Basic Problem Excel Solution Python Solution Extend & Iterate

Extending the Model - Multiple Interest Rates

Now we’ve got basic models to determine how long it will take
Martha to retire.

We’ve got a few assumptions built into the model. One is that
Martha will earn 5% on her investments

Rates of return are volatile, so we want to see how long it would take
her to retire if her return was different

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Basic Problem Excel Solution Python Solution Extend & Iterate

Programming Fundamentals - Iteration

In programming, for model building or otherwise, you often need to

repeat the same process for multiple different things

In Excel, you would do this by dragging formulas.

In Python, as in most other programming languages, we would use a

for loop

This says, do something, for each value I pass into the loop

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Basic Problem Excel Solution Python Solution Extend & Iterate

Iteration - Python vs. Excel

Python Iteration
inputs = [5, 10, 15] Excel Iteration
for item in inputs:
new_value = item + 2
print(new_value)

7
12
17

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Basic Problem Excel Solution Python Solution Extend & Iterate

Explaining Python Iteration

There’s a few things to unpack

here
Python Iteration
inputs = [5, 10, 15]
Here’s another type of object:
for item in inputs:
not a number or a string, but a
new_value = item + 2
list
print(new_value)

A list holds multiple objects, 7

and you can add or remove 12
items from lists 17

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Basic Problem Excel Solution Python Solution Extend & Iterate

Explaining Python Iteration (pt. 2)

Here we define a list of three

numbers as inputs
Python Iteration
inputs = [5, 10, 15]
Then we use a for loop to get
for item in inputs:
each input out of the list, and
new_value = item + 2
add 2 to it to create the new
print(new_value)
value
7
Finally we print each value as it 12
is generated 17

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Basic Problem Excel Solution Python Solution Extend & Iterate

Iterating the Existing Model

Expanding on Python and Excel

I will now expand the existing Excel and Python models to examine
multiple interest rates
Continue viewing the same previously downloaded files.

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Basic Problem Excel Solution Python Solution Extend & Iterate

Vary Savings Rate Lab

Extending a Simple Retirement Model

1 Now we want to see the effect of savings rate on time until
retirement, in addition to interest rate
2 In both Excel and Python, calculate the years to retirement for
savings rates of 10%, 25%, and 40%, and each of these cases with
each of the interest rate cases, 4%, 5%, and 6%
3 Be sure that you drag formulas in Excel and use for loops in Python
to accomplish this
4 In total you should have 9 calculated years to retirement numbers, in
each of the two models.
Answers: Slide 24 Resources: Slide 25

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Lecture Resources

Lecture Resources
1 Slides - Getting Started with Python and Excel
2 Lecture Notes - Getting Started with Python and Excel
3 Simple Retirement Model - Excel
4 Simple Retirement Model - Python

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Vary Savings Rate Lab, Answers
Extending a Simple Retirement Model, Answers
1 Martha has 61.1 years to retirement if she earns a 4% return and saves 10%.
2 Martha has 41.0 years to retirement if she earns a 4% return and saves 25%.
3 Martha has 31.9 years to retirement if she earns a 4% return and saves 40%.
4 Martha has 53.3 years to retirement if she earns a 5% return and saves 10%.
5 Martha has 36.7 years to retirement if she earns a 5% return and saves 25%.
6 Martha has 29.0 years to retirement if she earns a 5% return and saves 40%.
7 Martha has 47.6 years to retirement if she earns a 6% return and saves 10%.
8 Martha has 33.4 years to retirement if she earns a 6% return and saves 25%.
9 Martha has 26.7 years to retirement if she earns a 6% return and saves 40%.

Exercise: Slide 22 Resources: Slide 25

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Vary Savings Rate Lab Resources

Extending a Simple Retirement Model Resources

1 Simple Retirement Model - Excel
2 Simple Retirement Model - Python
3 Slides - Getting Started with Python and Excel

Exercise: Slide 22 Answers: Slide 24

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