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13. Using Financial Functions
13. Using Financial Functions
Although the bulk of Excel s financial functions are for professional fin-
anciers and investors, a few functions are useful for anyone planning to use
a loan to purchase a car or house. The examples in this chapter represent
a small subset of the calculations possible with Excel s financial func-
tions.
Excel 2013 adds two new financial functions:
PDURATION
PDURATION Calculates how many periods it will take for an in-
vestment to reach a certain value given a specific interest rate.
RRI
RRI Calculates the equivalent rate for the growth of an investment.
You can enter the beginning value, the value now, and how many years
have gone by, and the function will calculate the average annual in-
terest rate you earned.
Note
Eight other functions began using new algorithms starting in Excel
2010. This means that a worksheet in Excel 2007 might return different
answers from a worksheet in Excel 2013. These improved algorithms of-
ten affect only fringe cases of the functions. For normal usage, the
results are usually the same. However, if Excel 2013 returns a dif-
ferent result, it is more accurate than the Excel 2007 result. Here are
the functions affected:
CUMIPMT
CUMIPMT Cumulative interest paid on a loan
CUMPRINC
CUMPRINC Cumulative principal paid on a loan
IPMT
IPMT Interest payment for an investment
IRR
IRR Internal rate of return for a series of cash flows
PMT
PMT Payment for a loan
PPMT
PPMT Payment on principal for an investment
XIRR
XIRR Internal rate of return for a schedule of cash flows
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