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Financial Functions

This document provides an overview of financial functions in Microsoft Excel, specifically focusing on payment and interest rate functions. It includes examples of loan amortization schedules, cumulative payments for interest and principal, and calculations for effective interest rates. Additionally, it illustrates how to evaluate returns on investments using Excel functions.

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Ahmed Elrouby
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© © All Rights Reserved
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Download as XLSX, PDF, TXT or read online on Scribd
2 views

Financial Functions

This document provides an overview of financial functions in Microsoft Excel, specifically focusing on payment and interest rate functions. It includes examples of loan amortization schedules, cumulative payments for interest and principal, and calculations for effective interest rates. Additionally, it illustrates how to evaluate returns on investments using Excel functions.

Uploaded by

Ahmed Elrouby
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Module 3 Course 1 - Financial Modeling

Lesson 3 - Financial Functions


Payment Functions
This worksheet will illustrate some of the common payment functions used in Microsoft Excel
Payment functions are useful for setting a loan amortization schedule, showing you
all of the payments you must make over the life of the loan.

STEP 1 - Capture all of the values associated with the loan:


EXAMPLE 1.1 - 2 Year Car Loan at 9%, $ 20,000 borrowed
Loan Amount $ 20,000.00
Annual Interest Rate 9.0%
Monthly Interest Rate 0.750%
Number of Years 2
Payments per Month 12 (made beginning of the month)
Monthly Payment =PMT

STEP 2 - Setup a Loan Payment Schedule


< - - - Simple Calculation - - - > < - Using Excel Functions - >
Payment Payment Interest Principal Loan Interest Principal
Number Amount Amount Amount Balance Amount Amount
0 $ 20,000.00
1 $0.00 $ - $0.00 $ 20,000.00
2 $0.00 $ 150.00 ($150.00) $ 20,150.00
3 $0.00 $ 151.13 ($151.13) $ 20,301.13
4 $0.00 $ 152.26 ($152.26) $ 20,453.38
5 $0.00 $ 153.40 ($153.40) $ 20,606.78
6 $0.00 $ 154.55 ($154.55) $ 20,761.33
7 $0.00 $ 155.71 ($155.71) $ 20,917.04
8 $0.00 $ 156.88 ($156.88) $ 21,073.92
9 $0.00 $ 158.05 ($158.05) $ 21,231.98
10 $0.00 $ 159.24 ($159.24) $ 21,391.22
11 $0.00 $ 160.43 ($160.43) $ 21,551.65
12 $0.00 $ 161.64 ($161.64) $ 21,713.29
13 $0.00 $ 162.85 ($162.85) $ 21,876.14
14 $0.00 $ 164.07 ($164.07) $ 22,040.21
15 $0.00 $ 165.30 ($165.30) $ 22,205.51
16 $0.00 $ 166.54 ($166.54) $ 22,372.05
17 $0.00 $ 167.79 ($167.79) $ 22,539.84
18 $0.00 $ 169.05 ($169.05) $ 22,708.89
19 $0.00 $ 170.32 ($170.32) $ 22,879.21
20 $0.00 $ 171.59 ($171.59) $ 23,050.80
21 $0.00 $ 172.88 ($172.88) $ 23,223.68
22 $0.00 $ 174.18 ($174.18) $ 23,397.86
23 $0.00 $ 175.48 ($175.48) $ 23,573.34
24 $0.00 $ 176.80 ($176.80) $ 23,750.14
$ 3,750.14 $ (3,750.14) $ - $ -

You can also use Excel to calculated the cumulative payments for interest and principal:

Interest Principal
Year 2 Cumulative Payments $ (512.47) $ (10,370.24)
Simple Calculation $ - $ -
=CUMIPMT

How many periods are required to amortize the loan? #NUM! =NPER
=IPMT
=PPMT

=PV

$0.00 (Present Value of Annuity of Fixed Loan Payments = Value of the Loan)
(when payments are made at the beginning of the period, the Excel Functions will
calculate no interest for the initial payment, all of it is calculated as principal)
=CUMPRINC
Module 3 Course 1 - Financial Modeling
Lesson 3 - Financial Functions
Interest Rate Functions
This worksheet will illustrate some of the interest rate functions used in Microsoft Excel

EXAMPLE 2.1 - 2 Year Car Loan at 9%, $ 20,000 borrowed


Loan Amount $ 20,000.00
Annual Interest Rate 9.0%
Number of Years 2
Payments per Month 12 (beginning of period)
Monthly Payment $0.00
=EFFECT
What is the effective interest rate on this loan? 9.40%

What rate are you paying on each payment? -99.729% =RATE

EXAMPLE 2.2 - Short Term Investment


You invested $ 25,000 in a bond on March 1, 2013 and you
sold the investment for $ 28,500 on November 15, 2013

Settlement Date 3/1/2013 (date purchased)


Maturity Date 11/1/2013 (date liquidated)
Face Value of Bond $ 25,000 (initial investment amount)
Redemption Value $ 28,500 (amount paid at maturity)

What was the return on this investment? =INTRATE

What amount will I get back if the return rate is 15%? =RECEIVED

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