Column1 PV Formula FV Formula2 Rate

PV ₹ -200.00 =PV(B4,B5,,B3) -200 -200

FV ₹ 518.75 ₹ 518.75 =FV(10%,10,,-200) ₹ 518.75
Rate 10% 10% 10%
Nper 10 10 10
Formula3 Nper Formula4
-200
₹ 518.75
=RATE(F5,,F2,F3) 10%
10 =NPER(H4,,H2,H3)
Example You receive $100 4 years from now what is the
Cash flow/FV 100
time period 4
rate 10%
PV ($68.30) =PV(C4,C3,,C2)

Question You can invest $3000 in a two year investment that p

Cash flow/PV -3000

time period 2
rate 12%
FV $3,763.20 =FV(C12,C11,,C10)

Application Stock Govt Bonds

Cash flow -100 -100
time period 1 1
rate 9.55% 4.93%
FV $109.55 $104.93
=FV(C20,C19,=FV(D20,D19,,D
w what is the Present value today if rate of return is 10%

C3,,C2)

estment that pays you 12% per annum. How much is the value after 2 years

2,C11,,C10)

T-bills
-100
1
3.53%
$103.53
=FV(E20,E19,,E18)
ue after 2 years
 Find the present value of an annuity of $1,000 at the end
Examp
What amount should be invested today to rec
Cash 1000
time p 5
rate 10%
PV ($3,790.79)

FV
0
1 1000
2 1000
3 1000
4 1000
5 1000

ApplicSuppose you borrow $200,000 to buy a house on a 30-ye

The rate of loan is 8%. Find the monthly paym
Yearly
PV 200,000
NPER 30
RATE 8%
PMT ($17,765.49)
QuestThe future value of $1,000 at the end of each year for th
Fv ₹ 6,105.10
PMT -1000
Rate 10%
Nper 5
 ue of an annuity of $1,000 at the end of each year for the next five ye
hould be invested today to receive 1000 for the net 5 yea

=PV(C5,C4,1000)

rate PV

10% ₹ -909.09
10% ₹ -826.45
10% ₹ -751.31
10% ₹ -683.01
10% ₹ -620.92
₹ -3,790.79

w $200,000 to buy a house on a 30-year mortgage with monthly paym

is 8%. Find the monthly payment of the loan
Monthly
₹ 200,000.00
360
0.00666666667
=PMT(C23,C22,C21) ₹ -1,467.53
$1,000 at the end of each year for the next five years, assuming a 10%
=FV(C29,C30,C28)
 for the next five years, assuming a discount rate of 10%
for the net 5 years at the rate oof int of 10% ?

=PV(D10,B10,,C10)
=PV(D11,B11,,C11)
=PV(D12,B12,,C12)
=PV(D13,B13,,C13)
=PV(D14,B14,,C14)
=SUM(E10:E14)

with monthly payments.

1467.53 to be paid every

=C22*12
=C23/12
=PMT(E23,E22,E21)
ars, assuming a 10% discount rate
paid every month for thew next 360 months
onths
A gold mine, where you have the rights to the mine for the next 20 y
gold every year. The price per ounce is $300 currently, but it is expec
10%. The present value of the gold that will be extracted from this m

Year Cash flows rate

0 0
1 1545000
=300*5000*1.03
10%
2 1591350=E6*1.0310%
3 1639091=E7*1.0310%
4 1688263=E8*1.0310%
5 1738911=E9*1.0310%
6 1791078=E10*1.03
10%
7 1844811=E11*1.03
10%
8 1900155=E12*1.03
10%
9 1957160=E13*1.03
10%
10 2015875=E14*1.03
10%
11 2076351=E15*1.03
10%
12 2138641=E16*1.03
10%
13 2202801=E17*1.03
10%
14 2268885=E18*1.03
10%
15 2336951=E19*1.03
10%
16 2407060=E20*1.03
10%
17 2479271=E21*1.03
10%
18 2553650=E22*1.03
10%
19 2630259=E23*1.03
10%
20 2709167=E24*1.03
10%
 ine for the next 20 years, over which period you plan to extract 5,000 ounces of
rently, but it is expected to increase 3% a year. The appropriate discount rate is
xtracted from this mine can be estimated as follows –

PV

($1,404,545)
=PV(G6,D6,,E6)
($1,315,165)
=PV(G7,D7,,E7)
($1,231,473)
=PV(G8,D8,,E8)
($1,153,106)
=PV(G9,D9,,E9)
($1,079,727)
=PV(G10,D10,,E10)
($1,011,017)
=PV(G11,D11,,E11)
($946,680)
=PV(G12,D12,,E12)
($886,436)
=PV(G13,D13,,E13)
($830,027)
=PV(G14,D14,,E14)
($777,207)
=PV(G15,D15,,E15)
($727,748)
=PV(G16,D16,,E16)
($681,437)
=PV(G17,D17,,E17)
($638,073)
=PV(G18,D18,,E18)
($597,468)
=PV(G19,D19,,E19)
($559,448)
=PV(G20,D20,,E20)
($523,846)
=PV(G21,D21,,E21)
($490,511)
=PV(G22,D22,,E22)
($459,296)
=PV(G23,D23,,E23)
($430,068)
=PV(G24,D24,,E24)
($402,700)
=PV(G25,D25,,E25)
($16,145,980)
=SUM(H6:H25)
0 ounces of
ount rate is
Suppose you borrow $30000 today and pay off this loan in qua
at the end of a quarter. If the annual interest rate is 6%, what
Quarter
Annual 30,000 30000
Interest 6.00% 0.0150
Period 4 16
pmt -$2,122.95233489099

=D5 =-$D$8
Quarters Prinicipal payment
1 $30,000.00 $2,122.95
2 $28,327.05 $2,122.95
3 $26,629.00 $2,122.95
4 $24,905.48 $2,122.95
5 $23,156.11 $2,122.95
6 $21,380.50 $2,122.95
7 $19,578.26 $2,122.95
8 $17,748.98 $2,122.95
9 $15,892.26 $2,122.95
10 $14,007.69 $2,122.95
11 $12,094.86 $2,122.95
12 $10,153.33 $2,122.95
13 $8,182.67 $2,122.95
14 $6,182.46 $2,122.95
15 $4,152.25 $2,122.95
16 $2,091.58 $2,122.95
 Suppose a bank is offering you two different types of loans. Loan A is
an amortized loan over five years, with annual payments. Loan B is not
amortized, but rather requires payment of the interest end of the loan when
you repay the principal. The interest rate on both loans is 8%.

1. In which loan arrangement do you pay the most interest, in terms of the
present value of the interest?

2. In which loan arrangement do you pay the most principal, in terms of

the present value of the principal repayments?

3. Why do the present value of the interest and principal differ between
these two loan arrangements?
and pay off this loan in quarterly payments over four years, with each
interest rate is 6%, what is the amount of the payment that will pay
Monthly
30000
=C6/4 0.005 =C6/12
=4*4 48 =C7*12
=PMT(D6,D7,D5) -$704.55 =PMT(F6,F7,F5)

=C12*$D$6 =D12-E12 =C12-F12

Interest Principal paid Outstanding principal
$450.00 $1,672.95 $28,327.05
$424.91 $1,698.05 $26,629.00
$399.44 $1,723.52 $24,905.48
$373.58 $1,749.37 $23,156.11
$347.34 $1,775.61 $21,380.50
$320.71 $1,802.24 $19,578.26
$293.67 $1,829.28 $17,748.98
$266.23 $1,856.72 $15,892.26
$238.38 $1,884.57 $14,007.69
$210.12 $1,912.84 $12,094.86
$181.42 $1,941.53 $10,153.33
$152.30 $1,970.65 $8,182.67
$122.74 $2,000.21 $6,182.46
$92.74 $2,030.22 $4,152.25
$62.28 $2,060.67 $2,091.58
$31.37 $2,091.58 $0.00
 s. Loan A is A
Loan B is not PV 10000
of the loan when Rate 8%
Nper 5
Pmt ₹ -2,504.56
, in terms of the FV
Principal 10000
Interest 2522.82
al, in terms of formula =-G66*G65-G63

iffer between
our years, with each payment made
yment that will pay off this loan?

Monthly Prinicipal payment Interest Principal paid

1 30000.00 $704.55 150.00 554.55
2 29445.45 $704.55 147.23 557.32
3 28888.13 $704.55 144.44 560.11
4 28328.02 $704.55 141.64 562.91
5 27765.10 $704.55 138.83 565.73
6 27199.38 $704.55 136.00 568.55
7 26630.83 $704.55 133.15 571.40
8 26059.43 $704.55 130.30 574.25
9 25485.17 $704.55 127.43 577.12
10 24908.05 $704.55 124.54 580.01
11 24328.04 $704.55 121.64 582.91
12 23745.13 $704.55 118.73 585.83
13 23159.30 $704.55 115.80 588.75
14 22570.55 $704.55 112.85 591.70
15 21978.85 $704.55 109.89 594.66
16 21384.19 $704.55 106.92 597.63
17 20786.56 $704.55 103.93 600.62
18 20185.95 $704.55 100.93 603.62
19 19582.32 $704.55 97.91 606.64
20 18975.69 $704.55 94.88 609.67
21 18366.01 $704.55 91.83 612.72
22 17753.29 $704.55 88.77 615.78
23 17137.51 $704.55 85.69 618.86
24 16518.64 $704.55 82.59 621.96
25 15896.69 $704.55 79.48 625.07
26 15271.62 $704.55 76.36 628.19
27 14643.43 $704.55 73.22 631.33
28 14012.09 $704.55 70.06 634.49
29 13377.60 $704.55 66.89 637.66
 30 12739.94 $704.55 63.70 640.85
31 12099.09 $704.55 60.50 644.06
32 11455.03 $704.55 57.28 647.28
33 10807.76 $704.55 54.04 650.51
34 10157.25 $704.55 50.79 653.76
35 9503.48 $704.55 47.52 657.03
36 8846.45 $704.55 44.23 660.32
37 8186.13 $704.55 40.93 663.62
38 7522.51 $704.55 37.61 666.94
39 6855.57 $704.55 34.28 670.27
40 6185.30 $704.55 30.93 673.62
41 5511.67 $704.55 27.56 676.99
42 4834.68 $704.55 24.17 680.38
43 4154.30 $704.55 20.77 683.78
44 3470.52 $704.55 17.35 687.20
45 2783.33 $704.55 13.92 690.63
46 2092.69 $704.55 10.46 694.09
47 1398.60 $704.55 6.99 697.56
48 701.05 $704.55 3.51 701.05

B
10000
8%
5

₹ -14,693.28
10000
₹ 4,693.28
=-H67-H63
Outstanding principal
29,445.45
28,888.13
28,328.02
27,765.10
27,199.38
26,630.83
26,059.43
25,485.17
24,908.05
24,328.04
23,745.13
23,159.30
22,570.55
21,978.85
21,384.19
20,786.56
20,185.95
19,582.32
18,975.69
18,366.01
17,753.29
17,137.51
16,518.64
15,896.69
15,271.62
14,643.43
14,012.09
13,377.60
12,739.94
12,099.09
11,455.03
10,807.76
10,157.25
9,503.48
8,846.45
8,186.13
7,522.51
6,855.57
6,185.30
5,511.67
4,834.68
4,154.30
3,470.52
2,783.33
2,092.69
1,398.60
701.05
0.00
 ₹ -1,790.85
₹ -582.01
₹ -3,221.02
₹ -2,281.88

10%
₹ -13,269.50
₹ -1,363,075.39
₹ 603.91 ₹ -463.19 ₹ 1,067.10
₹ -1,467.53 8% 0.0066667
Suppose you inherited $100,000 and invested it at 7% per year. What is the most you could withdraw at the end of each of the next 10 years
PV -100000
RATE 7%
NPER 10
FV ₹ 196,715.14
PMT ₹ -14,237.75 ₹ -28,007.81

Monthly Prinicipal payment Interest Principal paid

1 ₹ 196,715.14 ₹ 28,007.74
2 ₹ 168,707.40 ₹ 28,007.81
3 ₹ 140,699.59 ₹ 28,007.81
4 ₹ 112,691.78 ₹ 28,007.81
5 ₹ 84,683.97 ₹ 28,007.81
6 ₹ 56,676.16 ₹ 28,007.81
7 ₹ 28,668.35 ₹ 28,007.81
8 ₹ 660.54 ₹ 28,007.81
9 ₹ -27,347.27 ₹ 28,007.81
10 ₹ -55,355.08 ₹ 28,007.81
uld withdraw at the end of each of the next 10 years and have a zero balance at Year 10?

Outstanding principal
₹ 168,707.40
₹ 140,699.59
₹ 112,691.78
₹ 84,683.97
₹ 56,676.16
₹ 28,668.35
₹ 660.54
₹ -27,347.27
₹ -55,355.08
₹ -83,362.89
₹ -1,147.20