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Unformatted text preview: ough D7 you can have formulas installed that will take the life
in years and multiply it by the compounding factor for Nper. You can also divide the interest rate by the
compounding factor to get the value for the period rate. Remember that, as with working with the tables
in the textbook, the interest rate and the number of periods must be expressed in comparable values. If the
document states that interest is 8% annually and it is compounded quarterly and that the life of the annuity
is 10 years, the effective values are 2% interest (8% / 4 quarters per year) and 40 periods (10 years X 4
quarters per year). Excel can do this within an input matrix or within the formula by entering a value such
as 8%/4 or 10*4.
The formula will also produce the value of $1, just like the tables in the textbook by placing the value
of 1 (one) in the “PMT” (Payment) or “FV” (Future value) window as appropriate. This value will be
carried out to more significant digits than the textbook’s tables even if formatted to show the same since
Excel keeps the real value in its “mind” even with trimmed or formatted presentations.
Excel works with standard finance and math logic. If the “PMT” (Payments) values are positive
indicating receiving cash or value, the “PV” (Present value) will be negative indicating cash or value
flowing out. If the “PMT” (Payments) are negative indicating cash or value flow out, the “PV” (Present
value) will be positive indicating cash or value flow in.
This worksheet has extensive “Concatenate” formulas to rephrase the statement for each formula.
You can read the “Concatenate” function explained elsewhere in this book. Future Value
Excel has a formula similar to “PV” (Present Value) for “FV” (Future Value) located under the Financial
formulas category. This formula is demonstrated on the “Future Value” worksheet of the “Time Value Of
Money” data file. The formula is written as “=FV(Period Interest, Periods, Payments, Future value, Chapter 15, Page 97
Payment at the beginning or...
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This note was uploaded on 09/19/2010 for the course ACCT 220 taught by Professor Ullmann during the Fall '10 term at University of Nebraska Kearney.
- Fall '10