Chapter 9 - Financial Functions in Excel Use the RATE, NPER, PMT, PV and FV functions to answer the following. Remember the following important subtleties: RATE = periodic rate; you must divide the APR the number of periods in one year. Anytime you send money to the bank it must be entered as a negative. You must enter any value that comes out of your pocket (like a payment to the bank or your retirement account) as a negative. Any value like a loan that you borrow from the bank is positive, since this is money going into your pocket. It is assumed all PMT's are made at the END of each period, while PV is the amount you have to START. (You may use the TYPE argument to change PMT's to the beginning of the period.) Write down the function as you would type into Excel: 1. What is your monthly payment on a $23,000 car loan at 8.75% for 5 years? 2. What APR will you need to guarantee yourself an annual payment of $60,000 for 25 years if you have $1,200,000 in the bank and you anticipate having nothing left at the end of 25 years? 3. How much money will you end up with if you make $650 monthly payments to your retirement account which earns 11.3% for 36 years? + Loan: $20,000 Years Monthly Payments 6% 5% 7% 8% 3 7 Years Interest Charged 6% 5% 7% 8% 3 7 Excel Financial Functions - RNPPF Rate(nper, pmt, pv, fy) The interest rate per period. For example, if you obtain an automobile loan at a 10 percent annual interest rate and make monthly payments, your interest rate per month is 10%/12, or 0.83%. You would enter 10%/12, or 0.83%, or 0.0083, into the formula as the rate. Nper (rate, pmt, ry. The total number of payment periods in an annuity. For example, if you get a four-year car loan and make monthly payments, your loan has 4*12 (or 48) periods. You would enter 48 into the formula for noen Pmt_rate, nper, pv, fv) The payment made each period and cannot change over the life of the annuity. Typically, pmt includes principal and interest but no other fees or taxes. For example, the monthly payments on a $10,000, four-year car loan at 12 percent are $263.33. You would enter -263.33 into the formula as the pmt. If pmt is omitted, you must include the fv argument. Ex (rate, nper, pmt, px - The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (the future value of a loan, for example, is 0). For example, if you want to save $50,000 to pay for a special project in 18 years, then $50,000 is the future value. You could then make a conservative guess at an interest rate and determine how much you must save each month. Px (rate, nper, pmt, fy ) The present value, or the lump-sum amount that a series of future payments is worth right now. Chapter 9 - Financial Functions in Excel Use the RATE, NPER, PMT, PV and FV functions to answer the following. Remember the following important subtleties: RATE = periodic rate; you must divide the APR the number of periods in one year. Anytime you send money to the bank it must be entered as a negative. You must enter any value that comes out of your pocket (like a payment to the bank or your retirement account) as a negative. Any value like a loan that you borrow from the bank is positive, since this is money going into your pocket. It is assumed all PMT's are made at the END of each period, while PV is the amount you have to START. (You may use the TYPE argument to change PMT's to the beginning of the period.) Write down the function as you would type into Excel: 1. What is your monthly payment on a $23,000 car loan at 8.75% for 5 years? 2. What APR will you need to guarantee yourself an annual payment of $60,000 for 25 years if you have $1,200,000 in the bank and you anticipate having nothing left at the end of 25 years? 3. How much money will you end up with if you make $650 monthly payments to your retirement account which earns 11.3% for 36 years? + Loan: $20,000 Years Monthly Payments 6% 5% 7% 8% 3 7 Years Interest Charged 6% 5% 7% 8% 3 7 Excel Financial Functions - RNPPF Rate(nper, pmt, pv, fy) The interest rate per period. For example, if you obtain an automobile loan at a 10 percent annual interest rate and make monthly payments, your interest rate per month is 10%/12, or 0.83%. You would enter 10%/12, or 0.83%, or 0.0083, into the formula as the rate. Nper (rate, pmt, ry. The total number of payment periods in an annuity. For example, if you get a four-year car loan and make monthly payments, your loan has 4*12 (or 48) periods. You would enter 48 into the formula for noen Pmt_rate, nper, pv, fv) The payment made each period and cannot change over the life of the annuity. Typically, pmt includes principal and interest but no other fees or taxes. For example, the monthly payments on a $10,000, four-year car loan at 12 percent are $263.33. You would enter -263.33 into the formula as the pmt. If pmt is omitted, you must include the fv argument. Ex (rate, nper, pmt, px - The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (the future value of a loan, for example, is 0). For example, if you want to save $50,000 to pay for a special project in 18 years, then $50,000 is the future value. You could then make a conservative guess at an interest rate and determine how much you must save each month. Px (rate, nper, pmt, fy ) The present value, or the lump-sum amount that a series of future payments is worth right now