FINANCIAL FUNCTIONS

Applications of Financial
Functions:
 How much you would need to spend on monthly payments
such as mortgage or car payments.

 How much you would need to save in order to accumulate a

specific amount by a certain point in time.

 How much of a down payment you would need to make, for

monthly payments to equal a particular amount.

 How much you would gain over time on a specific amount

of savings.

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PMT Function:
 It can be used to calculate the payments for a loan or the
future value of an investment.
Syntax:
= PMT ( rate , nper , pv , fv , type )
Where,
 rate: annual interest rate for the loan.
 nper: total number of payments to be made on the
investment/loan.
 pv: present value or the amount borrowed or & omitted in
case of calculating future value of an investment.
 fv: value of the investment at the end of the investment
period & omitted in case of loan payments.
 type: indicates when payments are due.

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Example:
 Vivek has decided to take out a loan of Rs1000000 from his
friendly banker. Lets calculate, how much per month is this
going to cost him for 5 years?(interest rate 24%)

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=PMT(D5,F5,H5)

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NPER Function
 Returns the number of periods for an investment based on
periodic, constant payments and a constant interest rate.

syntax:
=NPER(rate, pmt, pv, fv, type)

 Pmt: is the payment made each period; it cannot change

over the life of the annuity. Typically, pmt contains principal
and interest but no other fees or taxes.

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Example:
 For a personal loan of 2,50,000. Sai has agreed to pay
10,000 a month and 5 percent annual interest. How long
would it take to pay off that loan?
Here,
 amount of the payments is known.
 number of payments is the result.

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Solution:

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FV Function:
 Returns the future value of an investment based on periodic,
constant payments and a constant interest rate.

Syntax:
=FV(rate,nper,pmt,pv,type)

 The equal sign tells Excel that this is a formula.

 Within the parentheses are the arguments.

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Example:
 Imagine that you're saving for a vacation. You would like to
know how much you would have in 12 months, if your
account contained rs5000 to start with and you were to
deposit rs2000 a month, at an annual interest rate of 6
percent.
Given,
 interest rate of 6 percent annually is divided by 12 to give a
monthly rate.
 number of payments is 12 because you want the result after
12 months.
 payment amount is your monthly deposit. entered as -2000.
 present value is the amount already in the account, entered
as -5000.

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DB Function:
 Returns the depreciation of an asset for a specified period
using the fixed-declining balance method.
Syntax:
=DB(cost,salvage,life,period,month)
Where,
 Cost: is the initial cost of the asset.
 Salvage: is the value at the end of the depreciation.
 Life: is the number of periods over which the asset is being
depreciated.
 Period: is the period for which you want to calculate the
depreciation. Period must use the same units as life.
 Month: is the number of months in the first year.

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Example:

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NPV Function:
 Calculates the net present value of an investment by using a
discount rate and a series of future payments (negative
values) and income (positive values).
Syntax:
=NPV(rate,value1,value2, ...)
 Rate is the rate of discount over the length of one period.

 Value1, value2, ... are 1 to 29 arguments representing the

payments and income.

 Value1, value2, ... must be equally spaced in time and occur

at the end of each period. NPV uses the order of value1,
value2, ... to interpret the order of cash flows.

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Example:
 What is the net present value of periodic payments of 1000,
2000 and 30000 units with a discount rate of 8.75%. At time
zero the costs were paid as -4000 units.

=NPV(8.75%,1000,2000,30000)=4,943.21units. The
net present value is the returned value minus the initial costs
of 4000 units, therefore units.

NPV=943.21

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Other Financial Functions:
Almost 54 financial functions are available in MS EXCEL

 Depreciation Formulas

 Formulas for Interest, Cash Flow, Investments, Annuities

 Functions for Coupons

 Finance Formulas for Securities

 Formulas for Dollar Price Conversions

 Treasury Bill Functions

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