Unformatted text preview: Financial
Analysis using
Excel
Information requirements for function COUPDAYBS
COUPDAYS
COUPDAYSNC
COUPNCD
COUPPCD
COUPNUM
DURATION
MDURATION
PRICE
PRICEDISC
PRICEMAT
RECEIVED
YIELD
YIELDDISC
YIELDMAT
ACCRINT
ACCRINTM
INTRATE
DISC Excel for Professionals 2002 VJ Books. All rights reside with the author. Interest Discount Yields and
interest/ discount
rates Yield Basis # of periods Frequency,
and related Frequency of
payme
nts pa Redemption
amount Investment
amount Any amount paid
at maturity
? Price Prices and par values Maturity Settlement First coupon Issue Dates Par/coupon Function Financial Analysis using Excel Financial Analysis using Excel
Financial Analysis using Excel
Volume 6 in the series Excel for Professionals
Excel for Professionals
V olume 1: Excel For Beginners
Volume 2: Charting in Excel
Volume 3: Excel Beyond The Basics
Volume 4: Managing & Tabulating Data in Excel
Volume 5: Statistical Analysis with Excel
Volume 6: Financial Analysis using Excel
Published by VJ Books Inc All rights reserved. No part of this book may be used or reproduced in any form or by
any means, or stored in a database or retrieval system, without prior written
permission of the publisher except in the case of brief quotations embodied in
reviews, articles, and research papers. Making copies of any part of this book for any
purpose other than personal use is a violation of United States and international
copyright laws.
First year of printing: 2002
Date of this copy: Saturday, December 14, 2002
This book is sold as is, without warranty of any kind, either express or implied,
respecting the contents of this book, including but not limited to implied warranties
for the book's quality, performance, merchantability, or fitness for any particular
purpose. Neither the author, the publisher and its dealers, nor distributors shall be
liable to the purchaser or any other person or entity with respect to any liability, loss,
or damage caused or alleged to be caused directly or indirectly by the book.
This book is based on Excel versions 97 to XP. Excel, Microsoft Office, Microsoft
Word, and Microsoft Access are registered trademarks of Microsoft Corporation.
Publisher: VJ Books Inc, Canada
Author: Vijay Gupta 2 To Dr “Chini” at the Business School Georgetown Universitry
and SEC. Thanks for the timely support and advice. 3 Financial Analysis using Excel ABOUT THE AUTHOR
Vijay Gupta has taught statistic, econometrics, and finance to institutions in
the US and abroad, specializing in teaching technical material to
professionals. He has organized and held training workshops in the Middle East, Africa,
India, and the US. The clients include government agencies, financial
regulatory bodies, nonprofit and private sector companies. A Georgetown University graduate with a Masters degree in economics, he
has a vision of making the tools of econometrics and statistics easily
accessible to professionals and graduate students. His books on SPSS and
Regression Analysis have received rave reviews for making statistics and
SPSS so easy and “nonmathematical.” The books are in use by over 150,000
users in more than 140 nations. He is a member of the American Statistics Association and the Society for
Risk Analysis. In addition, he has assisted the World Bank and other organizations with
econometric analysis, survey design, design of international investments,
costbenefit, and sensitivity analysis, development of risk management
strategies, database development, information system design and
implementation, and training and troubleshooting in several areas. Vijay has worked on capital markets, labor policy design, oil research, trade,
currency markets, and other topics. 4 VISION
Vijay has a vision for software tools for Office Productivity and
Statistics. The current book is one of the first tools in stage one of his
vision. We now list the stages in his vision. Stage one: Books to Teach Existing Software
He is currently working on books on wordprocessing, and report
production using Microsoft Word, and a booklet on Professional
Presentations. The writing of the books is the first stage envisaged by Vijay for
improving efficiency and productivity across the world. This directly
leads to the second stage of his vision for productivity improvement
in offices worldwide. Stage two: Improving on Existing Software
The next stage is the construction of software that will radically
improve the usability of current Office software. Vijay’s first software is undergoing testing prior to its release in Jan
2003. The software — titled “Word Usability Enhancer” — will
revolutionize the way users interact with Microsoft Word, providing
users with a more intuitive interface, readily accessible tutorials, and
numerous timesaving and annoyanceremoving macros and utilities. He plans to create a similar tool for Microsoft Excel, and, depending
on resource constraints and demand, for PowerPoint, Star Office, etc. 5 Financial Analysis using Excel Stage 3: Construction of the first “feedbackdesigned” Office and Statistics
software
Vijay’s eventual goal is the construction of productivity software
that will provide stiff competition to Microsoft Office. His hope is
that the success of the software tools and the books will convince
financiers to provide enough capital so that a successful software
development and marketing endeavor can take a chunk of the multibillion dollar Office Suite market. Prior to the construction of the Office software, Vijay plans to
construct the “Definitive” statistics software. Years of working on
and teaching the current statistical software has made Vijay a
master at picking out the weaknesses, limitations, annoyances, and,
sometimes, pure inaccessibility of existing software. This 1.5 billion
dollar market needs a new visionary tool, one that is appealing and
inviting to users, and not forbidding, as are several of the current
software. Mr. Gupta wants to create integrated software that will
encompass the features of SPSS, STATA, LIMDEP, EViews,
STATISTICA, MINITAB, etc. Other
He has plans for writing books on the “learning process.” The books
will teach how to understand one’s approach to problem solving and
learning and provide methods for learning new techniques for selflearning. 6 CONTENTS
CHAPTER 1 WRITING FORMULAS 25 1.1 The Basics Of Writing Formulae 26 1.2 Tool for using this chapter effectively: Viewing the formula instead of the end
result 26
1.2.a
1.2.b 1.3 Types Of References Allowed In A Formula 30
1.3.a
1.3.b
1.3.c
1.3.d
1.3.e
1.3.f 1.4 The “A1” vs. the “R1C1“ style of cell references 28
Writing a simple formula that references cells 29
Referencing cells from another worksheet 30
Referencing a block of cells 30
Referencing non–adjacent cells 31
Referencing entire rows 32
Referencing entire columns 32
Referencing corresponding blocks of cells/rows/columns from a set of
worksheets 33 Working Simultaneously On Cells In Different Worksheets 34 CHAPTER 2 COPYING/CUTTING AND PASTING FORMULAE 36 2.1 Copying And Pasting A Formula To Other Cells In The Same Column 37 2.2 Copying And Pasting A Formula To Other Cells In The Same Row 38 2.3 Copying And Pasting A Formula To Other Cells In A Different Row And Column
39 2.4 Controlling Cell Reference Behavior When Copying And Pasting Formulae (Use
Of The “$” Key) 40
2.4.a Using the “$” sign in different permutations and computations in a formula 42 2.5 Copying And Pasting Formulas From One Worksheet To Another 43 2.6 Pasting One Formula To Many Cells, Columns, Rows 44 2.7 Pasting Several Formulas To A Symmetric But Larger Range 44 2.8 Defining And Referencing A “Named Range” 44
Adding several named ranges in one step 47
Using a named range 48 2.9 Selecting All Cells With Formulas That Evaluate To A Similar Number Type 49 2.10 Special Paste Options 49
2.10.a
2.10.b 2.11 Pasting only the formula (but not the formatting and comments) 49
Pasting the result of a formula, but not the formula itself 49 Cutting And Pasting Formulae 50 Financial Analysis using Excel 2.11.a The difference between “copying and pasting” formulas and “cutting and
pasting” formulas 50 2.12 Creating A Table Of Formulas Using Data/Table 51 2.13 Saving Time By Writing, Copying And Pasting Formulas On Several Worksheets
Simultaneously 51 CHAPTER 3 PASTE SPECIAL 53 3.1 Pasting The Result Of A Formula, But Not The Formula 54 3.2 Other Selective Pasting Options 57
3.2.a
3.2.b
3.2.c
3.2.d
3.2.e 3.3 Performing An Algebraic “Operation” When Pasting One Column/Row/Range On
To Another 59
3.3.a
3.3.b 3.4 Pasting only the formula (but not the formatting and comments) 57
Pasting only formats 57
Pasting data validation schemes 58
Pasting all but the borders 58
Pasting comments only 58 Multiplying/dividing/subtracting/adding all cells in a range by a number 59
Multiplying/dividing the cell values in cells in several “pasted on” columns
with the values of the copied range 60 Switching Rows To Columns 60 CHAPTER 4 INSERTING FUNCTIONS 62 4.1 Basics 62 4.2 A Simple Function 65 4.3 Functions That Need Multiple Range References 68 4.4 Writing A “Function Within A Function” 70 4.5 New FunctionRelated Features In The XP Version Of Excel 74
Searching for a function 74 4.5.a
4.5.b Enhanced Formula Bar 74
Error Checking and Debugging 75 CHAPTER 5 TRACING CELL REFERENCES & DEBUGGING FORMULA ERRORS 77 5.1 Tracing the cell references used in a formula 77 5.2 Tracing the formulas in which a particular cell is referenced 79 5.3 The Auditing Toolbar 80 5.4 Watch window (only available in the XP version of Excel) 81 5.5 Error checking and Formula Evaluator (only available in the XP version of Excel)
82 5.6 Formula Auditing Mode (only available in the XP version of Excel) 85 5.7 Cellspecific Error Checking and Debugging 86 8 C ontents 5.8 Error Checking Options 87 CHAPTER 6 LOAN REPAYMENTS 90 6.1 Single Period Payment On Principal And Interest 91
6.1.a Relation between NPER and RATE when the payment period is less than one
year 91
Payment on Principal only (not on interest) 92 6.1.b
6.1.c 6.2 Payment on interest only (not on principal) 92
Payment on interest and principal 93 Loan Repayments (Cumulative Payment Over Periods) 94
6.2.a
6.2.b Cumulative repayment of principal 94
Cumulative interest paid on a loan 95
Cumulative interest and principal paid on a loan between userchosen
periods 96
Summary of loan repayment formulae 97 6.3 Related Functions: RATE & NPER 98
RATE (“Interest Rate per period of an Annuity”) 98
NPER (“Number of periods in an Investment”) 99 6.4 Mapping Between Simple And Compound Rates For The Same Annual Interest
100
EFFECT (“Effective Interest Rate”) 100
NOMINAL (“Nominal Interest Rate”) 100 CHAPTER 7 DISCOUNT CASH FLOWS 103 7.1 Present Values 103
PV 104
NPV 105
XNPV 106 7.2 Discount Cash Flow Analysis: Rates Of Return For An Investment/Project 107
IRR 107
MIRR 108
XIRR 109 7.3 Future Values 110
FV function 110
Rate versus NPER 111
FVSCHEDULE function 111
Difference between FV and FVSCHEDULE 112 7.4 Annuities — Comparative Summary Of Functions 112 7.5 Depreciation 114
7.5.a Depreciation of an asset over a single period 114
Straightline and Sumofyear’s depreciation methods 114
SLN function: Straight line depreciation 114
SYD function: Sumofyears' digit method 114 7.5.b Depreciation of an asset over specified period using declining balance
methods 115
Fixed declining balance method 115
Variable declining balance method 116 9 Financial Analysis using Excel Allowing for a switch over between declining balances and straight line –
the VDB function 119 7.6 Risk Analysis— “IfThen” Scenarios 120 CHAPTER 8 SECURITIES FUNCTIONS 121 8.1 Information Requirements 121 8.2 CouponRelated Functions 124
COUPDAYBS 124
COUPDAYS 125
COUPDAYSNC 126
COUPNCD 127
COUPPCD 128
COUPNUM 129
DURATION & MDURATION (Bond price’s response to changes in yield)
functions 130 8.3 Price versus Yield, & Interest Calculations 132
8.3.a Security that pays periodic interest (Coupon Paying Bond) 132
YIELD 132
PRICE 133
ACCRINT 133
Price and Yield for odd (long or short) first or last period Bonds 134
Odd First Period 134
Yield 135
Odd Last Period 136
Yield 136 8.3.b A discounted security which may pay redemption at maturity 138
DISC 138
PRICEDISC 139
YIELDDISC 140 8.3.c Security that pays interest at maturity 141
PRICEMAT 141
YIELDMAT 142
ACCRINTM 142 8.3.d Fully invested security 144
INTRATE 144
RECEIVED 144 8.4 Information Requirements For Loan Repayment And Securities Functions 145 8.5 T Bill Formulae 146
TBILLEQ function 146
TBILLPRICE function 147
TBILLYIELD function: Yield for a treasury bill (given market price or par
value) 149 CHAPTER 9 FUNCTIONS FOR BASIC STATISTICS 152 9.1 “Averaged” Measures Of Central Tendency 153
9.1.a
9.1.b
9.1.c
9.1.d AVERAGE 153
TRIMMEAN (“Trimmed mean”) 154
HARMEAN (“Harmonic mean”) 155
GEOMEAN (“Geometric mean”) 156 10 C ontents 9.2 Location Measures Of Central Tendency (Mode, Median) 157
9.2.a
9.2.b 9.3 MEDIAN 158
MODE 158 Other Location Parameters (Maximum, Percentiles, Quartiles, Other) 158
9.3.a
9.3.b
9.3.c QUARTILE 159
PERCENTILE 159
Maximum, Minimum and “Kth Largest” 160
MAX (“Maximum value”) 160
MIN (“Minimum value”) 161
LARGE 161
SMALL 162 9.3.d Rank or relative standing of each cell within the range of a series 162
PERCENTRANK 162
RANK 163 9.4 Measures Of Dispersion (Standard Deviation & Variance) 163
Sample dispersion: STDEV, VAR 164
Population dispersion: STDEVP, VARP 164 9.5 Shape Attributes Of The Density Function (Skewness, Kurtosis) 165
9.5.a
9.5.b 9.6 Skewness 165
Kurtosis 167 Functions Ending With An “A” Suffix 168 CHAPTER 10 OTHER MATHEMATICS & STATISTICS FUNCTIONS 172 10.1 Counting and summing 173
COUNT function 173
COUNTA function also counts cells with logical or text values 175
COUNTBLANK function counts the number of empty cells in the range
reference 176
SUM function 176
PRODUCT function 177
SUMPRODUCT function 177 10.2 The “If” counting and summing functions: Statistical functions with logical
conditions 178
SUMIF function 179
COUNTIF function 179 10.3 Transformations (log, exponential, absolute, sum, etc) 181
Standardizing a series that follows a Normal Density Function 184 10.4 Deviations from the Mean 184
DEVSQ 184
AVEDEV 185 10.5 Cross series relations 186
10.5.a
10.5.b Covariance and correlation functions 186
Sum of Squares 186
SUMXMY2 function 187
SUMX2MY2 function 187 CHAPTER 11 LOGICAL & INFORMATION FUNCTIONS 190 11 Financial Analysis using Excel 11.1 Negative Nesting (The Not Function) 191 11.2 Functions That Output True/False After Evaluating If All/One/None Of The
Logical Expressions Are True (The Functions— And, Or) 192
11.2.a
11.2.b
11.2.c
11.2.d 11.3 Information Functions On Type Of Data In Cell (Is Functions) 197
11.3.a 11.4 AND function 192
OR function 193
NOT(AND) function 194
NOT(OR) function 195
TYPE function provides information on the data type of the value in a cell 199 Testing If Odd Or Even Number 201
ISODD function 201
ISEVEN function 201 11.5 Information On Error Type In A Cell (#N/A, #Value!, #Ref!, #Div/0!, #Num!,
#Name?, #Null!) 202
11.5.a 11.6 ERROR.TYPE function provides information on the Error type — if any  in a
cell 203 Lookup Or “Location” Functions 205
The functions: COLUMN/ROW 205
The functions: COLUMNS/ROWS 205
The functions: INDEX, MATCH, OFFSET, HYPERLINK, ADDRESS,
TRANSPOSE, AREAS, INDIRECT 206 CHAPTER 12 “SMART” NESTED FUNCTIONS THAT RESPOND TO FORMULA RESULT
208 12.1 If Function 208 12.2 Choose Function 209 12.3 Working with Nested functions 211
12.3.a Defining the Nested Function 211
Nesting by hand 211 12.3.b
12.3.c
12.3.d
12.3.e Nesting with the assistance of the “Insert Function” dialog 212
Formula AutoCorrection 214
Formula Bar identification of error 215
Function identification in the Formula Bar Assistant 216
Identification of cells referenced by the function highlighted in the Formula
Bar 218 12.4 Multiple Nesting: Tips 218 CHAPTER 13 ADDINS: ENHANCING EXCEL 220 13.1 AddIns: Introduction 220
13.1.a
13.1.b What can an AddIn do? 221
Why use an AddIn? 221 13.2 Add–ins installed with Excel 221 13.3 Other AddIns 221 13.4 The Statistics AddIn 222 12 C ontents 13.4.a Choosing the AddIns 222 CHAPTER 14 THE SOLVER TOOL FOR CONSTRAINED LINEAR OPTIMIZATION 227 14.1 Defining the objective function (Choosing the optimization criterion) 227 14.2 Adding constraints 231 14.3 Choosing Algorithm Options 232
Running the Solver 233 CHAPTER 15 “IFTHEN” ANALYSIS: SCENARIOS AND GOAL SEEK 236 15.1 Scenarios (for “If this assumptionthen this result”) 236
15.1.a Defining the Scenarios 237
Using the Scenarios 240
Scenario summary 241
Using the “Group and Outline” tool 242
Scenariobased Pivot Tables 244 15.2 Goal Seek (“If I want this cell to have a certain result, what value should that cell
take) 246
15.2.a
15.2.b Setting the desired value for the “target” cell (the one with the formula that
references the “solution” cell) 247
Choosing the “solution” cell 247
Running the utility 248 INDEX 242 13 Financial Analysis using Excel Mapping of menu options with sections of the book
and in the series of books You may be looking for a section that pertains to a particular menu option
in Excel. I now briefly lay out where to find (in the series) a discussion of
a specific menu option of Excel. Table 1: Mapping of the options in the “FILE“ menu Menu Option Section that discusses the option OPEN
SAVE
SAVE AS Volume 1: Excel For Beginners SAVE AS WEB PAGE Volume 3: Excel– Beyond The Basics SAVE WORKSPACE Volume 3: Excel– Beyond The Basics SEARCH Volume 1: Excel For Beginners PAGE SETUP Volume 1: Excel For Beginners PRINT AREA Volume 1: Excel For Beginners PRINT PREVIEW Volume 1: Excel For Beginners PRINT Volume 1: Excel For Beginners PROPERTIES Volume 1: Excel For Beginners Table 2: Mapping of the options in the “EDIT“ menu Menu Option Section that discusses the option UNDO Volume 1: Excel For Beginners REDO Volume 1: Excel For Beginners CUT
COPY Volume 1: Excel For Beginners 14 C ontents Menu Option Section that discusses the option PASTE
OFFICE CLIPBOARD Volume 1: Excel For Beginners PASTE SPECIAL Volume 3: Excel– Beyond The Basics FILL Volume 4: Managing & Tabulating Data in Excel CLEAR Volume 1: Excel For Beginners DELETE SHEET Volume 1: Excel For Beginners MOVE OR COPY SHEET Volume 1: Excel For Beginners FIND Volume 1: Excel For Beginners REPLACE Volume 1: Excel For Beginners GO TO Volume 3: Excel– Beyond The Basics LINKS Volume 3: Excel– Beyond The Basics OBJECT Volume 3: Excel– Beyond The Basics
Volume 2: Charting in Excel
Table 3: Mapping of the options in the “VIEW“ menu Menu Option Section that discusses the option NORMAL Volume 1: Excel For Beginners PAGE BREAK PREVIEW Volume 1: Excel For Beginners TASK PANE Volume 1: Excel For Beginners TOOLBARS Volume 1: Excel For Beginners
Volume 3: Excel– Beyond The Basics F ORMULA BAR
S TATUS BAR Leave it on (checked) HEADER AND FOOTER Volume 1: Excel For Beginners COMMENTS Volume 3: Excel– Beyond The Basics FULL SCREEN 15 Leave it on (checked) Volume 1: Excel For Beginners Financial Analysis using Excel Menu Option Section that discusses the option ZOOM Volume 1: Excel For Beginners Table 4: Mapping of the options in the “INSERT“ menu Menu Option Section that discusses the option CELLS Volume 1: Excel For Beginners ROWS Volume 1: Excel For Beginners COLUMNS Volume 1: Excel For Beginners WORKSHEETS Volume 1: Excel For Beginners CHARTS Volume 2: Charting in Excel PAGE BREAK Volume 1: Excel For Beginners FUNCTION chapter 1chapter 4 FUNCTION/FINANCIAL chapter 6chapter 8 FUNCTION/STATISTICAL chapter 9chapter 10 FUNCTION/LOGICAL Volume 3: Excel– Beyond The Basics FUNCTION/TEXT Volume 3: Excel– Beyond The Basics FUNCTION/INFORMATION Volume 3: Excel– Beyond The Basics FUNCTION/LOOKUP Volume 3: Excel– Beyond The Basics FUNCTION/MATH & TRIG Volume 3: Excel– Beyond The Basics FUNCTION/ENGINEERING Volume 3: Excel– Beyond The Basics FUNCTION/DATABASE Volume 3: Excel– Beyond The Basics FUNCTION/DATE & TIME Volume 3: Excel– Beyond The Basics NAME 2.8 COMMENT Volume 3: Excel– Beyond The Basics PICTURE Volume 2: Charting in Excel DIAGRAM Volume 2: Charting in Excel 16 C ontents Menu Option Section that discusses the option OBJECT Volume 3: Excel– Beyond The Basics HYPERLINK Volume 3: Excel– Beyond The Basics Table 5: Mapping of the options inside the “FORMAT“ menu Menu Option Section that discusses the option CELLS Volume 1: Excel For Beginners ROW Volume 1: Excel For Beginners COLUMN Volume 1: Excel For Beginners SHEET Volume 1: Excel For Beginners AUTOFORMAT Volume 1: Excel For Beginners CONDITIONAL FORMATTING Volume 3: Excel– Beyond The Basics STYLE Volume 1: Excel For Beginners Table 6: Mapping of the options inside the “TOOLS“ menu Menu Option
SPELLING Volume 1: Excel For Beginners ERROR CHECKING Volume 3: Excel– Beyond The Basics SPEECH Volume 4: Managing & Tabulating Data in Excel SHARE WORKBOOK Volume 3: Excel– Beyond The Basics TRACK CHANGES Volume 3: Excel– Beyond The Basics PROTECTION Volume 3: Excel– Beyond The Basics ONLINE
COLLABORATION Volume 3: Excel– Beyond The Basics GOAL SEEK 15.2 SCENARIOS 15.1 AUDITING 17 Section that discusses the option Volume 3: Excel– Beyond The Basics Financial Analysis using Excel Menu Option Section that discusses the option TOOLS ON THE WEB The option will take you to a Microsoft site that
provides access to resources for Excel MACROS In upcoming book on “Macros for Microsoft Office” ADDINS chapter 13 AUTOCORRECT
CUSTOMIZE Volume 1: Excel For Beginners
Volume 4: Managing & Tabulating Data in Excel
Volume 3: Excel– Beyond The Basics OPTIONS Volume 1: Excel For Beginners Table 7: Mapping of the options inside the “DATA” menu Menu Option Section that discusses the option SORT Volume 4: Managing & Tabulating Data in Excel FILTER Volume 4: Managing & Tabulating Data in Excel FORM Volume 4: Managing & Tabulating Data in Excel SUBTOTALS Volume 4: Managing & Tabulating Data in Excel VALIDATION Volume 4: Managing & Tabulating Data in Excel TABLE 2.12 CONSOLIDATION section 48.5 GROUP AND OUTLINE Volume 1: Excel For Beginners PIVOT REPORT Volume 4: Managing & Tabulating Data in Excel EXTERNAL DATA Volume 4: Managing & Tabulating Data in Excel Table 8: Mapping of the options inside the “WINDOW“ menu Menu Option Section that discusses the option HIDE Volume 3: Excel– Beyond The Basics SPLIT Volume 1: Excel For Beginners FREEZE PANES Volume 1: Excel For Beginners 18 C ontents Table 9: Mapping of the options inside the “HELP“ menu Menu Option
OFFICE ASSISTANT Volume 1: Excel For Beginners HELP Volume 1: Excel For Beginners WHAT’S THIS 19 Section that discusses the option Volume 1: Excel For Beginners Financial Analysis using Excel INTRODUCTION
Are there not enough Excel books in the market? I have asked myself this
question and concluded that there are books “inside me,” based on what I
have realized from observation by friends, students, and colleagues that I
have a “vision and knack for explaining technical material in plain
English.”
Read the book practicing the lessons on the sample files provided in the
zipped file you downloaded. I hope the book is useful and assists you in
increasing your productivity in Excel usage. You may be pleasantly
surprised at some of the features shown here. They will enable you to
save time.
The “Make me a Guru” series teach technical material in simple English.
A lot of thinking went into the sequencing of chapters and sections. The
book is broken down into logical “functional” components. Chapters are
organized into sections and subsections. This creates a smooth flowing
structure, enabling “total immersion” learning. The current book is
broken down into a multilevel hierarchy:
—Chapters, each teaching a specific skill/tool.
— Several sections within each chapter. Each section shows aspect of
the skill/tool taught in the chapter. Each section is numbered—for
example, “Section 1.2” is the numbering for the second section in
chapter 1.
— A few subsections (and maybe one further segmentation) within
each section. Each subsection lists a specific function, task, or
proviso related to the “master” section. The subsections are
numbered——for example, “1.2.a” for the first subsection in the
second section of chapter 1. 20 C ontents Unlike other publishers, I do not consider you dummies or idiots. Each
and everyone had the God given potential to achieve mastery in any field.
All one needs is a guide to show you the way to master a field. I hope to
play this role. I am confident that you will consider your self an Excel
“Guru” (in terms of the typical use of Excel in your profession) and so will
others.
Once you learn the way to master a windows application, this new
approach will enable you to pick up new skills” on the fly.” Do not argue
for your limitations. You have none.
I hope you have a great experience in learning with this book. I would
love feedback. Please use the feedback form on our website vjbooks.net.
In addition, look for updates and sign up for an infrequent newsletter at
the site. VJ Inc Corporate and Government Training
We provide productivityenhancement and capacity building for corporate,
government, and other clients. The onsite training includes courses on:
• • Improving the Coordination Between Informational Technology
Departments and Data Analysts & other endusers of
Information • Office Productivity Software and Tools • Data Mining • Financial Analysis • Feasibility Studies • 21 Designing and Implementing Improved Information and
Knowledge Management Systems Risk Analysis, Monitoring and Management Financial Analysis using Excel • Statistics, Forecasting, Econometrics • Building and using Credit Rating/Monitoring Models • Specific software applications, including Microsoft Excel, VBA,
Word, PowerPoint, Access, Project, SPSS, SAS, STATA, ands
many other Contact our corporate training group at http://www.vjbooks.net. BASICS
The fundamental operations in Excel are taught in Volume 1: Excel For
Beginners, Volume 2: Charting in Excel, and Volume 3: Excel– Beyond The
Basics FUNCTIONS
I teach the writing of formulas and associated topics in Volume 3: Excel–
Beyond The Basics. I show, in a stepbystep exposition, the proper way
for writing cell references in a formula. The book describe tricks for
copying/cutting and pasting in several examples. In addition, I discuss
special pasting options.
Finally, different types of functions are classified under logical categories
and discussed within the optimal category. The categories include
financial, Statistical, Text, Information, Logical, and “Smart” Logical. FINANCE
In three chapters on financial functions, I list the functions used for
estimating loan repayments (for example, like a car loan or house
mortgage), discount cash flow analysis (used often for estimating the
returns and present values of multiperiod investment projects), and
parameters associated with securities market instruments like bonds and 22 C ontents Tbills.
If your interest is Investment Banking or Feasibility Studies (Project
Finance), you should learn Scenarios, the Solver utility, and Goal Seek.
With Scenarios, you can perform basic risk analysis. STATISTICS PROCEDURES
Three chapters teach statistics functions including the use of Excel
functions for building Confidence Intervals and conducting Hypothesis
Testing for several types of distributions. The design of hypothesis tests
and the intermediate step of demarcating critical regions are taught
lucidly. MANAGING & TABULATING DATA
Excel has extremely powerful data entry, data management, and
tabulation tools. The combination of tools provide almost database like
power to Excel. Unfortunately, the poor quality of the menu layout and
the help preclude the possibility of the user selflearning these features.
These features are taught in Volume 4: Managing & Tabulating Data in
Excel CHARTING
Please refer to book two in this series. The book title is Charting in Excel. Sample data
All the sample data files are included in the zipped file. 23 P age for Notes Chapter 1: Writing Formulas CHAPTER 1
W RITING FORMULAS This chapter discusses the following topics:
— THE BASICS OF WRITING FORMULAE
— TOOL FOR USING THIS CHAPTER EFFECTIVELY: VIEWING
THE FORMULA INSTEAD OF THE END RESULT
— The A1 VS THE R1C1 STYLE OF CELL REFERENCES
— TYPES OF REFERENCES ALLOWED IN A FORMULA
— REFERENCING CELLS FROM ANOTHER WORKSHEET
— REFERENCING A BLOCK OF CELLS
— REFERENCING NON–ADJACENT CELLS
— REFERENCING ENTIRE ROWS
— REFERENCING ENTIRE COLUMNS
— REFERENCING CORRESPONDING BLOCKS OF
CELLS/ROWS/COLUMNS FROM A SET OF WORKSHEETS
The most important functionality offered by a spreadsheet application is
the ease and flexibility of writing formulae. In this chapter, I start by
showing how to write simple formula and then build up the level of
complexity of the formulae.
Within the sections of this chapter, you will find tips and notes on
commonly encountered problems or issues in formula writing. 25 Financial Analysis using Excel 1.1 T HE BASICS OF WRITING FORMULAE
This section teaches the basics of writing functions. 1.2 T OOL FOR USING THIS CHAPTER EFFECTIVELY:
V IEWING THE FORMULA INSTEAD OF THE END
RESULT
For ease of understanding this chapter, I suggest you use a viewing option
that shows, in each cell on a worksheet, the formula instead of the result.
Follow the menu path TOOLS/OPTIONS/VIEW. In the area “Window
Options” select the option “Formulas” as shown in Figure 1.
Execute the dialog by clicking on the button OK. Go back to the
worksheet. The formula will be shown instead of the calculated value.
Eventually you will want to return to the default of seeing the results
instead of the formula. Deselect “formula” in the area “Windows Options”
in TOOLS/OPTIONS/VIEW. 26 Chapter 1: Writing Formulas Figure 1: Viewing the formulas instead of the formula result The effect is only cosmetic; the results will not change. As you shall see
later, what you have just done will facilitate the understanding of
functions.
In addition, leave the option VIEW/ FORMULA BAR selected as shown in
Figure 2. Figure 2: Select “Formula Bar” 27 Financial Analysis using Excel T HE “A1” VS. THE “R1C1“ STYLE OF CELL REFERENCES 1.2.A The next figure shows a simple formula. The formula is written into cell
G15. The formula multiplies the values inside cells F8 and F6. Figure 3: A!style cell referencing This style of referencing is called the “A1“ style or “absolute” referencing.
The exact location of the referenced cells is written. (The cells are those
in the 6th and 8th rows of column F.) One typically works with this style.
However, there is another style for referencing the cells in a formula.
This style is called the “R1C1“ style or “relative” referencing. The same
formula as in the previous figure but in R1C1 style is shown in the next
figure. Figure 4: The same formula as in the previous figure, but in R1C1 (Offset) style cell
referencing while the previous figure showed A1 (Absolute) style cell referencing Does not this formula look different? This style uses relative referencing.
So, the first cell (F8) is referenced relative to its position in reference to
the cell that contains the formula (cell G15). Row 8 is 7 rows below row
15 and column F is 1 column before column G. Therefore, the cell
reference is “minus seven rows, minus 1 column” or “R[— 7]C[— 1].”
If you see a file or worksheet with such relative referencing, you can
switch all the formulas back to absolute “A1” style referencing by going to
TOOLS/OPTIONS/GENERAL and deselecting the option “R1C1 reference
style.” 28 Chapter 1: Writing Formulas Figure 5: Settings for Formula Referencing W RITING A SIMPLE FORMULA THAT REFERENCES CELLS 1.2.B Open the sample file “File3.xls” and choose the worksheet “main.”
Assume you want to write add the values in cells C2231 and D223 (that is,
to calculate “C223 + D223”) and place the result into cell F223.
Click on cell F223. Keyin “=“and then write the formula by clicking on
the cell C223, typing in “+” then clicking on cell “D223.” Figure 6: Writing a formula After writing in the formula, press the key ENTER. The cell F223 will
contain the result for the formula contained in it. Figure 7: The result is shown in the cell on which you wrote the formula 1 29 Cell C223 is the cell in column C and row 223. Financial Analysis using Excel 1.3 1.3.A T YPES OF REFERENCES ALLOWED IN A FORMULA R EFERENCING CELLS FROM ANOTHER WORKSHEET You can reference cells from another worksheet. Choose cell H235 on the
worksheet “main.” In the chosen cell, type the text shown in the next
figure. (Do not press the ENTER key; the formula is incomplete and you
will get an error message if you press ENTER.) Figure 8: Writing or choosing the reference to the first referenced range Then select the worksheet “second” and click on cell D235. Now press the
ENTER key. The formula in cell H235 of worksheet “main” references the
cell D235 from the worksheet “second”. The next figure illustrates this. Figure 9: Writing or choosing the reference to the second referenced range which is not on the
worksheet on which you are writing the formula In this formula, the part “second!” informs Excel that the range referenced
is from the sheet “second. 1.3.B R EFERENCING A BLOCK OF CELLS Select the worksheet “main.” Choose cell H236. In the chosen cell, type
the text shown in the next figure. 30 Chapter 1: Writing Formulas Figure 10: This formula requires a block of cells as a reference Use the mouse to highlight the block of cells “E223 to E235.” Type in a
closing parenthesis and press the ENTER key. The resulting function is
shown in the next figure. Figure 11: Formula with a block of cells as the reference R EFERENCING NON–ADJACENT CELLS 1.3.C Choose cell H237. Click in the cell and type the text shown in the next
figure. Figure 12: The core function is typed first As in the previous example, choose cells E223 to E235 by highlighting
them— the formula should like the one shown in the next figure. Figure 13: The first block of cells is referenced Type a comma. The resulting formula should look like that shown in the
next figure. 31 Financial Analysis using Excel Figure 14: Getting the formula ready for the second block of cells Highlight the block of cells “E210 to E222.” Keyin a closing parenthesis
and press the ENTER key. Figure 15: The formula with references to two nonadjacent blocks of cells 1.3.D R EFERENCING ENTIRE ROWS Choose cell H238. In this cell, type the text shown in the next figure.
Using the mouse, highlight the rows 197 to 209. Type in a closing
parenthesis and press the ENTER key. The resulting formula is shown in
the next figure. Figure 16: Referencing entire rows 1.3.E R EFERENCING ENTIRE COLUMNS Choose cell H239. In this cell, type the text shown in the next figure
Using the mouse, highlight the columns C and D. Keyin a closing
parenthesis and press the ENTER key. 32 Chapter 1: Writing Formulas Figure 17: Referencing entire columns 1.3.F R EFERENCING CORRESPONDING BLOCKS OF
C ELLS/ROWS/COLUMNS FROM A SET OF WORKSHEETS Assume you have a workbook with six worksheets on similar data from
six clients. You want to sum cells “C4 to F56” across all six worksheets.
One way to do this would be to create a formula in each worksheet to sum
for that worksheet’s data and then a formula to add the results of the
other six formulae.
Another way is using “3–D references.” The row and column make the
first two dimensions; the worksheet set is the third dimension. You can
use only one formula that references all six worksheets that the relevant
cells within them.
While typing the formula,
• Type the “=“sign,
• Write the formula (for example, “Sum”),
• Place an opening parenthesis “(,” then
• Select the six worksheets by clicking at the name tab of the first
one and then pressing down SHIFT and clicking on the name tab
of the sixth worksheet, and then
• Highlight the relevant cell range on any one of them,
• Type in the closing parenthesis “)”
• And press the ENTER key to get the formula
=SUM(Sheet1:Sheet6!”C4:F56”) 33 P age for Notes W ORKING SIMULTANEOUSLY ON CELLS IN 1.4 D IFFERENT WORKSHEETS
Assume your workbook has 18 worksheets, each for a different country.
Assume further that all the worksheets have a similar composition— the
same variables in the same columns and rows. You want to make some
calculations for each country/worksheet. The long way of doing this is
calculating separately for each country/worksheet. However, this means
that you will be repeating the same step 17 times.
An easier way is to select all the worksheets and do the calculations only
once. Whenever you select several worksheets2 and perform some
formatting on a range of cells, rows, or columns in one of the worksheets,
the same is automatically conducted for the same range of cells, rows, or
columns in all the selected worksheets.
If you write a formula on a cell (for example, in cell “C3”) in one of the
worksheets, the same formula is automatically written in the same cell (in
cell “C3”) on all the selected worksheets. Whenever you copy and paste
formulas or cell values in one worksheet, the same copy and paste action
is replicated on the other worksheets. Once again, as the other sections in this chapter, this 2 Selecting multiple consecutive worksheets: (a) click on the first sheet, (b) press
down on the SHIFT key, and, (c) click on the last sheet. Selecting multiple nonconsecutive worksheets: (a) click on the first sheet, (b) press down on the CTRL
key, and, (c) one by one, click on the other worksheets you want to select. If a
sheet is selected successfully, its sheet tab will be highlighted. Chapter 2: Copying/Cutting and pasting formulae feature is best learned by practice. So, try it out on the sample file
“Files1.xls.” In that file, all the worksheets whose names are country
names (see the worksheets “Algeria,” “Bahrain,” … , “Yemen”) are
identical in their structure.
— In cell D5 of each cell, I wanted the formula “= (C5/C4) — 1.” I
selected all the worksheets and typed the formula into cell D5 of
only one of the worksheets. The formula was automatically
replicated on all the worksheets I had selected.
— Write the formula “= (C6/C5) — 1” into cell D6 of all these
worksheets using this method. With all the worksheets
selected, try different things like formatting cells, changing the
width of columns, etc. Notice that you only have to work on one
worksheet, and the work is automatically replicated for all the
selected worksheets.
The use of this feature is optimized if data in separate worksheets is
arranged in a manner that facilitates work on several sheets. 35 Financial Analysis using Excel CHAPTER 2
C OPYING/CUTTING AND
PASTING FORMULAE This chapter teaches the following topics:
— COPYING AND PASTING A FORMULA TO OTHER CELLS IN
THE SAME COLUMN
— COPYING AND PASTING A FORMULA TO OTHER CELLS IN
THE SAME ROW
— COPYING AND PASTING A FORMULA TO OTHER CELLS IN A
DIFFERENT ROW AND COLUMN
— CONTROLLING CELL REFERENCE BEHAVIOR WHEN
COPYING AND PASTING FORMULAE (USE OF THE “$”
KEY)
— USING THE “$” SIGN IN DIFFERENT PERMUTATIONS AND
COMPUTATIONS IN A FORMULA.
— COPYING AND PASTING FORMULAS FROM ONE
WORKSHEET TO ANOTHER
— SPECIAL PASTE OPTIONS
— PASTING ONLY THE FORMULA (BUT NOT THE FORMATTING
AND COMMENTS)
— PASTING THE RESULT OF A FORMULA, BUT NOT THE
FORMULA ITSELF
— CUTTING AND PASTING FORMULAE
— THE DIFFERENCE BETWEEN “COPYING AND PASTING“
FORMULAS AND “CUTTING AND PASTING” FORMULAS 36 Chapter 2: Copying/Cutting and pasting formulae — SAVING TIME BY WRITING, COPYING AND PASTING
FORMULAS ON SEVERAL WORKSHEETS
SIMULTANEOUSLY C OPYING AND PASTING A FORMULA TO OTHER 2.1 C ELLS IN THE SAME COLUMN
Often one wants to write analogous formulae for several cases. For
example, assume you want to write a formula analogous to the formula in
F223 into each of the cells F224 to F2353. The quick way to do this is to:
— Click on the “copied from” cell F223.
— Select the option EDIT/COPY. (The menu can also be accessed by
rightclicking on the mouse or by clicking on the COPY icon.)
— Highlight the “pasted on” cells F224 to F235 and
— Choose the menu option EDIT/PASTE. (The menu can also be
accessed by rightclicking on the mouse or by clicking on the
PASTE icon.)
— Press the ENTER key.
The formula is pasted onto the cells F224 to F235 and the cell references 3 37 The formula in F223 adds the values in cells that are 3 and 2 columns to the left (that
is, cells in columns in C and D.) Financial Analysis using Excel within each formula are adjusted4 for the location difference
between the “pasted on” cells and the “copied from” cell. Figure 18: Pasting a formula C OPYING AND PASTING A FORMULA TO OTHER 2.2 C ELLS IN THE SAME ROW
Select the range F223— F235 (which you just created in the previous sub–
section). Select the option EDIT/COPY. Choose the range G223— G235
(that is, one column to the right) and choose the menu option
EDIT/PASTE. Now click on any cell in the range G223— G235 and see
how the column reference has adjusted automatically. The formula in 4 The formula in the “copied cell” F223 is “C223 + D223” while the formula in the
“pasted on” cell F225 is “C225 + D225.” (Click on cell F225 to confirm this.) The cell
F225 is two rows below the cell F223, and the copyingandpasting process accounts
for that. 38 Chapter 2: Copying/Cutting and pasting formulae G223 is “D223 + E223” while the formula in F223 was “C223 + D223”.
The next figure illustrates this. Because you pasted one column to the
right, the cell references automatically shifted one column to the right.
So:
— The reference “C” became “D,” and
— The reference “D” became “E.” Figure 19: Cell reference changes when a formula is copied and pasted The examples in 2.1 on page 32 and 2.2 on page 33 show the use of “Copy
and Paste” to quickly replicate formula in a manner that maintains
referential parallelism. 2.3 C OPYING AND PASTING A FORMULA TO OTHER
C ELLS IN A DIFFERENT ROW AND COLUMN
Select the cell F223. Select the option EDIT/COPY. Choose the range
H224 (that is, two columns to the right and one row down from the copied
cell) and choose the menu option EDIT/PASTE. Observe how the column
and row references have changed automatically— the formula in H224 is 39 Financial Analysis using Excel “E224 + F224” while the formula in F223 was “C223 + D223”.
The next figure illustrates this. Because you pasted two columns to the
right and one row down, the cell references automatically shifted two
columns to the right and one row down. So:
— The reference “C” became “E” (that is, two columns to the right)
— The reference “D” became “F” (that is, two columns to the right)
— The references “223” became “224” (that is, one row down) Figure 20: Copying and pasting a formula 2.4 C ONTROLLING CELL REFERENCE BEHAVIOR WHEN
C OPYING AND PASTING FORMULAE (USE OF THE
“$” KEY)
The use of the dollar key “$” (typed by holding down SHIFT and choosing
the key “4”) allows you to have control over the change of cell references in
the “Copy and Paste” process. The use of this feature is best shown with
some examples.
— The steps in copy and pasting a formula from one range to another:
— Click on the “copied from” cell F223.
— Select the option EDIT/COPY. (The menu can also be accessed by
rightclicking on the mouse or by clicking on the COPY icon.) 40 Chapter 2: Copying/Cutting and pasting formulae — Choose the “pasted on” cell F219 by clicking on it, and
— Select the menu option EDIT/PASTE. (The menu can also be
accessed by rightclicking on the mouse or by clicking on the
PASTE icon.)
— Press the ENTER key.
— The formula “C219 + D219” will be pasted onto cell F219. (For a
pictorial reproduction of this, see Figure 21.) Figure 21: The “pastedon” cell Change the formula by typing the dollar signs as shown Figure 22. Figure 22: Inserting dollar signs in order to influence cell referencing Copy cell F219. Paste into G220 (that is, one column to the right and one
row down). The dollar signs will ensure that the cell reference is not
adjusted for the row or column differential for the parts of the formula
that have the dollar sign before them5— see the formula in cell F220 5 41 In this example, the parts are the “C” reference and “219” reference in “$C$219” part of
the formula. Financial Analysis using Excel (reproduced in Figure 23). Figure 23: The “copiedfrom” and “pastedon” cells with the use of the dollar sign For the parts of the cell that do not have the dollar sign before them, the
cell references adjust to maintain referential integrity6. U SING THE “$” SIGN IN DIFFERENT PERMUTATIONS AND 2.4.A C OMPUTATIONS IN A FORMULA
The dollar sign in the
“copied from” cell
Reference behavior
with a dollar sign
before one of the
column references The copy &
paste action
Copy F219
and paste
into G220. The cell references in the “pasted on” cell
depend on the location of the dollar signs in the
formula in the original, “copied from” cell
Figure: 24: Only the reference to “C” does not adjust
because only “C” has a dollar prefix Original cell:
F219 = $C219 + D219
Reference behavior
with a dollar sign
before one of the row
references Copy F219
and paste
into G220. Figure 25: Only the reference to “219” (in the formula
part “C$219”) does not adjust because only that “219”
has a dollar prefix Original cell: 6 The part “D219” adjusts to “E220” to adjust for the fact that the “pasted on” cell is one
column to the right (so “D E") and one row below (so “219 220”.) 42 Chapter 2: Copying/Cutting and pasting formulae The dollar sign in the
“copied from” cell The copy &
paste action The cell references in the “pasted on” cell
depend on the location of the dollar signs in the
formula in the original, “copied from” cell F219 = C$219 + D219 Reference behavior
with a dollar sign
before all but one of
the row/column
references Copy F219
and paste
into G220. Figure 26: the references to “C,” “D” and to “219” (in
the formula part “$D$219”) do not adjust because they
all have a dollar prefix Original cell:
F219 = $C219 +
$D$219
Original cell:
F219 = $C$219 +
$D$219
Original cell:
F219 = $C219 +
$D219
Original cell:
F219 = C219 +
$D$219 2.5 Copy F219
and paste
into G220. Try it… Copy F219
and paste
into G220. Try it... Copy F219
and paste
into G220. Try it... G220 = $C$219 + $D$219 G220 = $C220 + $D220 G220 = D220 + $D$219 C OPYING AND PASTING FORMULAS FROM ONE
W ORKSHEET TO ANOTHER
The worksheet “second” in the sample data file has the same data as the
worksheet you are currently on (“main.”) In the worksheet main, select
the cell F219 and choose the menu option EDIT/COPY. Select the
worksheet “second” and paste the formula into cell F219. Notice that the
formula is duplicated. 43 Financial Analysis using Excel 2.6 P ASTING ONE FORMULA TO MANY CELLS,
C OLUMNS, ROWS
Copy the formula. Select the range for pasting and paste or “Paste
Special” the formula. 2.7 P ASTING SEVERAL FORMULAS TO A SYMMETRIC
B UT LARGER RANGE
Assume you have different formulas in cells G2, H2, and I2. You want to
paste the formula:
— In G2 to G3:G289
— In H2 to H3:H289
— In I2 to I3:I289
Select the range G2:I2. Pick the menu option EDIT/COPY. Highlight the
range G3:I289. (Shortcut: select G3. Scroll down to I289 without
touching the sheet. Depress the SHIFT key and click on cell I289.) Pick
the menu option EDIT/PASTE. 2.8 D EFINING AND REFERENCING A “NAMED RANGE”
You can use range names as references instead of exact cell references.
Named ranges are easier to use if the names chosen are explanatory.
First, you have to define named ranges. This process involves informing 44 Chapter 2: Copying/Cutting and pasting formulae Excel that the name, for example, “age_nlf,” refers to the range “C2:C19.”
Pick the menu option “INSERT/NAME/DEFINE.” The dialog (userinput
form) that opens is shown in the next figure. Type the name of the range
into the textbox “Names in workbook” and the “Cell References” in the
box “Refers to:” See the next figure for an example. Figure 27: The DEFINE NAMES dialog Click on the button “Add.” The named range is defined. The name of a
defined range is displayed in the large textbox in the dialog. The next
figure illustrates this text. Figure 28: Once added, the defined named range’s name can be seen in the large textbox Several named ranges can be defined. A named range can represent
multiple blocks of cells. 45 Financial Analysis using Excel Figure 29: Defining a second named range. On clicking “Add,” the named range is defined, as
shown in the next figure. You can view the ranges represent by any name. Just click on the name
in the central textbox and the range represented by the name will be
displayed in the bottom box. Figure 30: Two named ranges are defined 46 Chapter 2: Copying/Cutting and pasting formulae Figure 31: You can define many ranges. Just make sure that the names are explanatory and
not confusing. Adding several named ranges in one step If the first/last row/column in your ranges has the labels for the range,
then you can define names for all the ranges using the menu option
INSERT/NAMES/CREATE. The dialog is reproduced in the next figure. Figure 32: CREATE NAMES In our sample data set, I selected columns “A” and “B” and created the
names from the labels in the first row. 47 Financial Analysis using Excel Figure 33: The named ranges “Country_Name,” and “Series_Name” were defined in one step
using “Create Names” Using a named range Named ranges are typically used to make formulas easier to read. The
named ranges could also be used in other procedures
Assume you want to sum several of the ranges defined above. One way to
sum them would be to select them onebyone from the worksheet. Another way is to use the menu option INSERT/NAME/PASTE to select
and paste the names of the ranges. The names are explanatory and
reduce the chances of errors in cell referencing.
A reference to the named range is pasted onto the formula as shown
below. 48 Chapter 2: Copying/Cutting and pasting formulae Figure 34: Pasting named ranges 2.9 S ELECTING ALL CELLS WITH FORMULAS THAT
E VALUATE TO A SIMILAR NUMBER TYPE
Volume 3: Excel– Beyond The Basics. 2.10 2.10.A S PECIAL PASTE OPTIONS P ASTING ONLY THE FORMULA (BUT NOT THE FORMATTING AND
C OMMENTS) Refer to page 52 in chapter 3. 2.10.B P ASTING THE RESULT OF A FORMULA, BUT NOT THE FORMULA
I TSELF Refer to page 49 in chapter 3. 49 Financial Analysis using Excel C UTTING AND PASTING FORMULAE 2.11 T HE DIFFERENCE BETWEEN “COPYING AND PASTING” FORMULAS 2.11.A A ND “CUTTING AND PASTING” FORMULAS Click on cell F223, select the option EDIT/CUT, click on cell H224 and
choose the menu option EDIT/PASTE. The formula in the “pasted on” cell
is the same as was in the “cut from” cell. (The formula “=C223 + D223.”)
Therefore, there is no change in the cell references after cutting–and–
pasting. While copy–and–paste automatically adjusts for cell reference
differentials, cut–and–paste does not.
If you had used copy and paste, the formula in H224 would be “=D224 +
E224.” Figure 35: Cut from cell F223 Figure 36: Paste into cell H223. Note that the cell references do not adjust. After doing this, select the option EDIT/UNDO because I want to
maintain the formulas in F223— F235 (and not because it is required for
a cut and paste operation). 50 Chapter 2: Copying/Cutting and pasting formulae 2.12 C REATING A TABLE OF FORMULAS USING
D ATA/TABLE
The menu option DATA/TABLE supposedly offers a tool for creating an XY table of formula results. However, the method needs so much data
arrangement that it is no better than using a simple copy and paste
operation on cells! 2.13 S AVING TIME BY WRITING, COPYING AND PASTING
F ORMULAS ON SEVERAL WORKSHEETS
SIMULTANEOUSLY
Refer to Volume 3: Excel– Beyond The Basics to learn how to work with
multiple worksheets. The section will request you to follow our example
of writing a formula for several worksheets together. 51 P age for Notes Chapter 3: Paste Special CHAPTER 3
P ASTE SPECIAL This chapter teaches the following topics:
— PASTING THE RESULT OF A FORMULA, BUT NOT THE
FORMULA
— OTHER SELECTIVE PASTING OPTIONS
— PASTING ONLY THE FORMULA (BUT NOT THE FORMATTING
AND COMMENTS)
— PASTING ONLY FORMATS
— PASTING DATA VALIDATION SCHEMES
— PASTING ALL BUT THE BORDERS
— PASTING COMMENTS ONLY
— PERFORMING AN ALGEBRAIC “OPERATION” WHEN PASTING
ONE COLUMN/ROW/RANGE ON TO ANOTHER
— MULTIPLYING/DIVIDING/SUBTRACTING/ADDING ALL CELLS
IN A RANGE BY A NUMBER
— MULTIPLYING/DIVIDING THE CELL VALUES IN CELLS IN
SEVERAL “PASTED ON” COLUMNS WITH THE VALUES OF
THE COPIED RANGE
— SWITCHING ROWS TO COLUMNS
This less known feature of Excel has some great options that save time
and reduce annoyances in copying and pasting. 53 Financial Analysis using Excel 3.1 P ASTING THE RESULT OF A FORMULA, BUT NOT
T HE FORMULA
Sometimes one wants the ability to copy a formula (for example, “=C223 +
D223)”) but paste only the resulting value. (The example that follows will
make this clear.)
Select the range “F223:F235” on worksheet ““main.”
Choose the menu option FILE/NEW and open a new file. Go to any cell in
this new file and choose the menu option EDIT/PASTE SPECIAL.
In the area “Paste,” choose the option “Values” as shown in Figure 37. Figure 37: The PASTE SPECIAL dialog in Excel versions prior to Excel XP 54 Chapter 3: Paste Special In Excel XP, the “Paste
Special” dialog has three
additional options:
• Paste Formulas
and number
formats (and not
other cell
formatting like
font, background
color, borders, etc) • Paste Values and
number formats
(and not other cell
formatting like
font, background
color, borders, etc) • Paste only
“Column widths.” In Excel XP, the “Paste”
icon provides quick access
to some types of “Paste
Special.” The options are
shown in the next figure.
The calculated values in
the “copied” cells are
pasted. The formula is not
pasted. Try the same
experiment using
EDIT/PASTE instead of
EDIT/PASTE SPECIAL.
The usefulness of the
55 Figure 38: “Paste Special” dialog In Excel XP, Figure 39: The pasting options can be accessed by
clicking on the arrow to the right of the “Paste” icon Financial Analysis using Excel In Excel XP, the “Paste
Special” dialog has three
additional options:
• Paste Formulas
and number
formats (and not
other cell
formatting like
font, background
color, borders, etc) • Paste Values and
number formats
(and not other cell
formatting like
font, background
color, borders, etc) • Figure 38: “Paste Special” dialog In Excel XP, Paste only
“Column widths.” former will be apparent. 56 Chapter 3: Paste Special O THER SELECTIVE PASTING OPTIONS 3.2 P ASTING ONLY THE FORMULA (BUT NOT THE FORMATTING AND 3.2.A C OMMENTS) Choose the option “Formulas” in the area “Paste” of the dialog (userinput
form) associated with the menu “EDIT/PASTE SPECIAL.” This feature
makes the pasted values free from all cell references. The “pasted on”
range will only contain pure numbers. The biggest advantage of this
option is that it enables the collating of formula results in different
ranges/sheets/workbooks onto one worksheet without the bother of
maintaining all the referenced cells in the same workbook/sheet as the
collated results. Figure 40: Pasting formulas only P ASTING ONLY FORMATS 3.2.B Choose the option “Formats” in the area “Paste” of the dialog associated
with the menu “EDIT/PASTE SPECIAL use the “Format Painter” icon. I
prefer using the icon.
Refer to Volume 1: Excel For Beginners for a discussion on the format
painter. 57 Financial Analysis using Excel 3.2.C P ASTING DATA VALIDATION SCHEMES Pick the option “Validation” in the area “Paste” of the dialog associated
with the menu “EDIT/PASTE SPECIAL.” Data validation schemes are
discussed in Volume 4: Managing & Tabulating Data in Excel. This
option can be very useful in standardizing data entry standards and rules
across an institution. 3.2.D P ASTING ALL BUT THE BORDERS Choose the option “All except borders” in the area “Paste” of the dialog
associated with the menu “EDIT/PASTE SPECIAL.” All other formatting
features, formulae, and data are pasted. This option is rarely used. 3.2.E P ASTING COMMENTS ONLY Pick the option “Comments” in the area “Paste” of the dialog associated
with the menu “EDIT/PASTE SPECIAL.” Only the comments are pasted.
The comments are pasted onto the equivalently located cell. For example,
a comment on the cell that is in the third row and second column that is
copied will be pasted onto the cell that is in the third row and second
column of the “pasted on” range. This option is rarely used. 58 Chapter 3: Paste Special P ERFORMING AN ALGEBRAIC “OPERATION” WHEN 3.3 P ASTING ONE COLUMN/ROW/RANGE ON TO
ANOTHER M ULTIPLYING/DIVIDING/SUBTRACTING/ADDING ALL CELLS IN A 3.3.A R ANGE BY A NUMBER Assume your data is expressed in millions. You need to change the units
to billions— that is, divide all values in the range by 1000. The complex
way to do this would be to create a new range with each cell in the new
range containing the formula “cell in old range/1000.” A much simpler
way is to use PASTE SPECIAL. On any cell in the worksheet, write the
number 1000. Click on that cell and copy the number. Choose the range
whose cells need a rescaling of units. Go to the menu option EDIT/PASTE
SPECIAL and choose “Divide” in the area Options. The range will be
replaced with a number obtained by dividing each cell by the copied cells
value!
The same method can be used to multiply, subtract or add a number to all
cells in a range Figure 41: You can multiply (or add/subtract/divide) all cells in the “pasted on” range by
(to/by/from) the value of the copied cell 59 Financial Analysis using Excel 3.3.B M ULTIPLYING/DIVIDING THE CELL VALUES IN CELLS IN SEVERAL
“ PASTED ON” COLUMNS WITH THE VALUES OF THE COPIED
RANGE You can use the same method to add/subtract/multiply/divide one
column’s (or row’s) values to the corresponding cells in one or several
“pasted on” columns (or rows). Copy the cells in column E and paste special onto the
cells in columns C and D choosing the option “Add” in the area
“Operation” of the paste special dialog. (You can use EDIT/UNDO to
restore the file to its old state.) 3.4 S WITCHING ROWS TO COLUMNS
Choose any option in the “Paste” and “Operations” areas and choose the
option “Transpose.” If pasting a range with many columns and rows you
may prefer to paste onto one cell to avoid getting the error “Copy and
Paste areas are in different shapes.” 60 P age for Notes Financial Analysis using Excel CHAPTER 4
I NSERTING FUNCTIONS This chapter teaches the following topics:
— A SIMPLE FUNCTION
— FUNCTIONS THAT NEED MULTIPLE RANGE REFERENCES
— WRITING A “FUNCTION WITHIN A FUNCTION“
— NEW IN EXCEL XP
— RECOMMENDED FUNCTIONS IN THE FUNCTION WIZARD
— EXPANDED AUTOSUM FUNCTIONALITY
— FORMULA EVALUATOR
— FORMULA ERROR CHECKING B ASICS 4.1 Excel has many in–built functions. The functions may be inserted into a
formula. Accessing the functions dialog/wizard
(a) select the menu path INSERT/FUNCTION, or
(b) click on the function icon (see Figure 42) 62 Chapter 4: Inserting functions Figure 42: The Function icon The “Paste Function” dialog (or wizard, because it is a series of dialogs)
opens. The dialog is shown in Figure 43. Figure 43: Understanding the PASTE FUNCTION dialog 1 2 3 The equivalent dialog in the XP version of Excel is called INSERT
FUNCTION. (It is reproduced in the next figure below.) The dialog has
one new feature—a “Search for a function” utility. The “Function
category” is now available by clicking on the list box next to the label “Or
select a category.” 63 Financial Analysis using Excel Figure 44: The equivalent dialog in the XP version of Excel is called INSERT FUNCTION This dialog has three parts:
(1) The area “Function category” on the left half shows the labels of
each group of functions. The group “Statistical” contains
statistical functions like “Average” and “Variance.” The group
“Math & Trig” contains algebra and trigonometry functions like
“Cosine.” When you click on a category name, all the functions
within the group are listed in the area “Function name.”
(2) The area “Function name” lists all the functions within the
category selected in the area “Function category.” When you
click on the name of a function, its formula, and description is
shown in the gray area at the bottom of the dialog.
(3) The area with a description of the function Step 2 for using a function in a formula
Click on the “Function category” (in area 1 or the left half of the dialog) 64 Chapter 4: Inserting functions that contains the function, then click on the function name in the area
“Function name” (in area 2 or the left half of the dialog) and then execute
the dialog by clicking on the button OK. 4.2 A SIMPLE FUNCTION
In my first example, I show how to select and use the function “Average”
which is under the category “Statistical.”
Choose the category “Statistical” as shown in Figure 45. Figure 45: Choosing a function category Choose the formula “Average” in the area “Function name.”
This is shown in Figure 46.
Execute the dialog by clicking on the button OK. 65 Financial Analysis using Excel Figure 46: Choosing a function name The dialog (userinput form) for the “Average” function opens.
For a pictorial reproduction of this, see Figure 47. Figure 47: The dialog of the chosen function Step 3 for inserting a function — defining the data
arguments/requirements for the function Figure 48: Selecting the cell references whose values will be the inputs into the function 66 Chapter 4: Inserting functions You have to tell Excel which cells contain the data to which you want to
apply the function “AVERAGE.” Click on the right edge of the textbox
“Number1”7. (That is, on the red–blue–and–white corner of the cell.) Go
to the worksheet that has the data you want to use and highlight the
range “C2 to E3.” Click on the edge of the textbox. (For a pictorial
reproduction of this, see Figure 48.)
You will be taken back to the “Average” dialog. Notice that — as shown in
Figure 49 — the cell reference “C2:E3” has been added.
Furthermore, note that the answer is provided at the bottom (see the line
“Formula result = 9973333.333”).
Execute the dialog by clicking on the button OK. Figure 49: The completed function dialog 7 67 If you want to use nonadjacent ranges in the formula, then use the textbox “Number
2” for the second range. Excel will add more textboxes once you fill all the available
ones. If the label for a textbox is not in bold then it is not essential to fill that textbox. In the AVERAGE dialog shown in Figure 402, the label for the first textbox
(“Number 1”) is in bold—so it has to be filled. The label for the second textbox
(“Number 2”) is not in bold — so, it can be left empty. Financial Analysis using Excel The formula is written into the cell and is shown in Figure 50. Figure 50: The function is written into the cell Press the ENTER key and the formula will be calculated.
You can work with this formula in a similar manner as a simple formula
— copying and pasting, cutting and pasting, writing on multiple
worksheets, etc.
If you remember the function name, you do not have to use
INSERT/FUNCTION. Instead, you can simple type in the formulas using
the keyboard. This method is faster but requires that you know the
function. 4.3 F UNCTIONS THAT NEED MULTIPLE RANGE
R EFERENCES
Some formulas need a multiple range reference. One example is the
correlation formula (“CORREL“). Assume, in cell J1, you want to
calculate the correlation between the data in the two ranges: “D2 to D14”
and “E2 to E14.”
Activate cell J1. Select the option INSERT/FUNCTION. Choose the
function category “Statistical.” In the list of functions that opens in the
right half of the dialog, choose the function “CORREL“ and execute the
dialog by clicking on the button OK. 68 Chapter 4: Inserting functions Figure 51: Choosing the function CORREL The CORREL dialog (shown in the next figure) opens. The function needs
two arrays (or series) of cells references. (Because the labels to both the
textbox labels are bold, both textboxes have to be filled for the function
to be completely defined.) Therefore, the pointing to the cell references
has to be done twice as shown in Figure 53 and the next two figures. Figure 52: The CORREL dialog Choosing the first array/series
Click on the box edge of “Array1” (as shown in Figure 52.) Then go to the
relevant data range (D2 to D14 in this example) and select it. Figure 53: Selecting the first data input for the function 69 Financial Analysis using Excel Repeat the same for “Array 2,” selecting the range “E2:E14” this time. Figure 54: The first data input has been referenced The formula is complete. The result is shown in the dialog in the area at
the bottom “Formula result.” Execute the dialog by clicking on the button
OK. Figure 55: The second data input has also been referenced Once the dialog closes, depress the ENTER key, and the function will be
written into the cell and its result evaluated/calculated. Figure 56: The function as written into the cell. W RITING A “FUNCTION WITHIN A FUNCTION” 4.4 I use the example of the CONFIDENCE function from the category
“Statistical.”
Choose the menu option INSERT/FUNCTION. 70 Chapter 4: Inserting functions Choose the function category “Statistical.”
In the list of functions that opens in the right half of the dialog, choose the
function CONFIDENCE and execute the dialog by clicking on the button
OK. Figure 57: Selecting the CONFIDENCE function The Confidence dialog (userinput form) requires8 three parameters: the
alpha, standard deviation, and sample size. First type in the alpha
desired as shown in Figure 58. (An alpha of “.05” corresponds to a 95%
confidence level while an alpha value of “:.1” corresponds to a confidence
interval of 90 %.) Figure 58: Dialog for CONFIDENCE 8 71 We know that all three are necessary because their labels are in bold. Financial Analysis using Excel Press the OK button. Figure 59: The first part of the function Type a comma after the “.05” (see Figure 60) and then go to
INSERT/FUNCTION and choose the formula STDEV as shown in Figure
61. Figure 60: Placing a comma before entering the second part Choose the range for which you want to calculate the STDEV (for
example, the range “E:E”) and execute the dialog by clicking on the button
OK. Figure 61: Using STDEV function for the second part of the function The formula now becomes: Figure 62: A function within a function The main formula is still CONFIDENCE. The formula STDEV provides
one of the parameters for this main formula. The STDEV function is
nested within the CONFIDENCE function. 72 Chapter 4: Inserting functions Type a comma, and then go to INSERT/FUNCTION and choose the
function “Count” from the function category “Statistical” to get the final
formula. Figure 63: The completed formula There are two other ways to write this formula.
Select the option INSERT/FUNCTION, choose the function
CONFIDENCE from the category “Statistical” and type in the formulae
“STDEV(E:E)” and “COUNT(E:E)” as shown in Figure 64.
This method is much faster but requires that you know the function
names STDEV and COUNT. Figure 64: If subfunctions are required in the formula of a function, the subfunctions may be
typed into the relevant textbox of the function’s dialog The third way to write the formula is to type it in. This is the fastest
method. Figure 65: The result is the same 73 Financial Analysis using Excel N EW FUNCTIONRELATED FEATURES IN THE XP 4.5 V ERSION OF EXCEL Searching for a function Type a question (like “estimate maximum value”) into the box “Search for
a function” utility and click on the button “Go.” Excel will display a list of
functions related to your query. Figure 66: Search for a function utility is available in the XP version of Excel E NHANCED FORMULA BAR 4.5.A After you enter a number or cell reference for the first function
“argument” (or first “requirement”) and type in a comma, Excel
automatically converts to bold format the next argument/requirement. In
the example shown in the next figure, Excel makes bold the font for the
argument placeholder pmt after you have entered a value for nper and a
comma. Figure 67: The Formula Bar Assistant is visible below the Formula Bar Similarly, the argument/requirement after pmt has a bold font after you
have entered a value or reference for the argument pmt 74 Chapter 4: Inserting functions Figure 68: The next “expected” argument/requirement if highlighted using a bold font The square brackets around the argument/requirement “fv” indicate that
the argument is optional. You need not enter a value or reference for the
argument. Figure 69: An optional argument/requirement 4.5.B E RROR CHECKING AND DEBUGGING This topic is taught in Volume 3: Excel– Beyond The Basics 75 P age for Notes Chapter 5: Tracing Cell References & Debugging Formula Errors CHAPTER 5
T RACING CELL REFERENCES &
DEBUGGING FORMULA ERRORS This short chapter demonstrates the following topics:
— TRACING THE CELL REFERENCES USED IN A FORMULA
— TRACING THE FORMULAS IN WHICH A PARTICULAR CELL
IS REFERENCED
— WATCH WINDOW
— ERROR CHECKING
— FORMULA EVALUATION 5.1 T RACING THE CELL REFERENCES USED IN A
F ORMULA
Click on the cell that contains the formula whose references need to be
visually traced. Pick the menu option TOOLS/AUDITING/TRACE
PRECEDENTS. (For a pictorial reproduction of this, see Figure 70.) 77 Financial Analysis using Excel Figure 70: Tracing precedents. These options are from Excel versions prior to Excel XP. Figure 71: Excel XP offers several errorchecking and debugging tools. As shown in Figure 72, blue arrows will trace the references.
If a group of cells is referenced, then the group will be marked by a blue
rectangle. The two rectangular areas are referenced in the formula. 78 Chapter 5: Tracing Cell References & Debugging Formula Errors Figure 72: The arrows define and trace all the cells/ranges referenced in the active cell T RACING THE FORMULAS IN WHICH A PARTICULAR 5.2 C ELL IS REFERENCED
You may want to do the opposite— see which formulas reference a
particular cell.
•
• 79 First, click on the cell of interest.
Then, pick the menu option TOOLS/AUDITING/TRACE
DEPENDENTS as shown in Figure 73. Now the arrows will go
from the active cell to all the cells that have formulas that use
the active cell. Financial Analysis using Excel Figure 73: Tracing Dependents. These options are from Excel versions prior to Excel XP. Remove all the auditing arrows by following the menu path
TOOLS/AUDITING/REMOVE ALL ARROWS. 5.3 T HE AUDITING TOOLBAR
The “Auditing” toolbar opens automatically when you are using the
auditing option (TOOLS/AUDITING) to review formula references. Figure 74: The “Auditing” toolbar 5.4 W ATCH WINDOW (ONLY AVAILABLE IN THE XP
V ERSION OF EXCEL)
The window is accessed through the menu path TOOLS/ AUDITING/
SHOW WATCH WINDOW, or VIEW/ TOOLBARS/ WATCH WINDOW. 80 Chapter 5: Tracing Cell References & Debugging Formula Errors Figure 75: The Watch Window may not display correctly. Use the mouse to drag the walls of
the dialog to a workable size. Add one cell on whose values you want to keep tabs.
The value will be shown in the Watch Window so that you can see the
value even if you are working on cells or sheets that are far from the cell
whose value is being “watched.” Figure 76: Add Watch You can add many cells to the Watch Window. Note that the Watch
Window provides precise information on the location of the cell being
watched and the formula in the cell. For example, the first watched cell is
on cell D8 in sheet “Date to serial” in the file “Date and Time.xls.” The
formula in the cell is “=DATE(F7, E7, D7)”. Figure 77: You can add many cells to the Watch Window 81 Financial Analysis using Excel E RROR CHECKING AND FORMULA EVALUATOR 5.5 ( ONLY AVAILABLE IN THE XP VERSION OF EXCEL)
The tools are accessed through TOOLS/ERROR CHECKING and
TOOLS/FORMULA AUDITING/EVALUATE FORMULA.
The Error Checking dialog shows the formula in the cell as well as the
type of error. In this example, these are “=DEGREE(COS(C6))” and
“Invalid Name Error,” respectively.
The button (“Help on this error”) links to a help file containing assistance
on understanding and debugging the error.
The button “Show Calculation Steps” links to a stepbystep debugger that
assists in catching the calculation step at which the error occurred.
This debugger has the same functionality as the Formula Auditor
(accessed through TOOLS/FORMULA AUDITING/EVALUATE
FORMULA). Figure 78: The Error Checking dialog shows the formula in the cell as well as the type of error The button “Ignore Error” keeps the error “as is.” The button Options 82 Chapter 5: Tracing Cell References & Debugging Formula Errors opens the dialog for setting errorchecking options. The choices within the
dialog are listed in section 5.8.
The Formula Evaluator shows the step at which the first calculation error
occurred. This helps in identifying the primary problem. In this example,
no error has occurred in the formula part “COS(C6))”. The dialog informs
you that “The next evaluation (that is, calculation step), will result in an
error.” Figure 79: The Formula Evaluator shows the step at which the first calculation error occurred After clicking on evaluate, you see that the error is in the formula part
“DEGREE.” Excel also informs you of the type of error— “#NAME?”
suggests that “DEGREE” does not match the name of any Excel function.
(The correct function is “DEGREES.”)
The “COS“ function is nested within the DEGREE function. Clicking on
“Step In” will evaluate the nested function only. 83 Financial Analysis using Excel Figure 80: After clicking on evaluate... The “COS“ function is evaluated. The function has no error. If a function has more than two levels of nesting, then you
can use the “Step Out” button to evaluate the function at the higher
level of nesting. Figure 81: The “COS“ function is evaluated 84 Chapter 5: Tracing Cell References & Debugging Formula Errors 5.6 F ORMULA AUDITING MODE (ONLY AVAILABLE IN
T HE XP VERSION OF EXCEL)
This feature is accessed through TOOLS/FORMULA
AUDITING/FORMULA AUDITING MODE. After this mode is selected,
when you select a cell that has or is referenced by a formula, Excel
highlights the other referenced/referencing cells.
In addition, you have quick access (via the “Formula Auditing” toolbar) to
all the Auditing tools discussed earlier in this chapter. Figure 82: Formula Auditing Mode 5.7 C ELLSPECIFIC ERROR CHECKING AND
D EBUGGING
On every cell whose value evaluates to an error value, you will see a small
icon with a “!” image and a downward arrow. Click on the arrow to obtain
assistance for debugging the error. 85 Financial Analysis using Excel Figure 83: Cellspecific Error Checking and Debugging In the example shown in the figure, the options show:
— the error type (“Number Error”),
— a link to assistance on understanding and debugging the error (“Help
on this error”),
— a stepbystep debugger to catch the calculation step at which the error
occurred (“Show Calculation Steps”),
— the option to ignore and thereby keep the error as is (“Ignore Error”),
— a link to directly edit the formula in the cell (“Edit in Formula Bar”),
— the overall errorchecking options (“Error Checking Options”), and
— direct access to the Formula Auditing Toolbar (“Show Formula
Auditing Toolbar”) and, thereby, to all the features of Auditing (these
features are taught in this chapter) 86 Chapter 5: Tracing Cell References & Debugging Formula Errors E RROR CHECKING OPTIONS 5.8 The Error Checking options can be assessed through
TOOLS/OPTIONS/ERROR CHECKING or through TOOLS/ERROR
CHECKING/OPTIONS. The dialog is reproduced in the next figure. Figure 84: Error Checking options You can inform Excel to show as an error any cell: that contains:
• A formula that evaluates to an error value • A formula that refers to an empty cell • A formula that is not consistent with the other formulas and cell
references in neighboring cells • 87 A twodigit year (like “02”) instead of a fourdigit year (like “2002”) Financial Analysis using Excel • A number stored as text The other options are beyond the scope of this book. I recommend sticking
with the default settings reproduced in the next figure. 88 P age for Notes Financial Analysis using Excel CHAPTER 6
L OAN REPAYMENTS This chapter lists functions on:
— SINGLE PERIOD PAYMENT ON PRINCIPAL AND INTEREST
— RELATION BETWEEN NPER AND RATE WHEN THE
PAYMENT PERIOD IS LESS THAN ONE YEAR.
— PAYMENT ON PRINCIPAL ONLY (NOT ON INTEREST)
— PAYMENT ON INTEREST ONLY (NOT ON PRINCIPAL)
— PAYMENT ON INTEREST AND PRINCIPAL
— LOAN REPAYMENTS (CUMULATIVE PAYMENT OVER
PERIODS)
— CUMULATIVE REPAYMENT OF PRINCIPAL
— CUMULATIVE INTEREST PAID ON A LOAN
— CUMULATIVE INTEREST AND PRINCIPAL PAID ON A LOAN
BETWEEN THE START AND END OF THE LOAN
— SUMMARY OF LOAN REPAYMENT FORMULAE
— ASSOCIATED FUNCTIONS
— RATE, NPER
— CONVERTING BETWEEN EFFECTIVE AND NOMINAL
INTEREST RATES OR MAPPING BETWEEN SIMPLE AND
COMPOUND INTEREST RATES FOR THE SAME ANNUAL
INTEREST CHARGES
— EFFECT, NOMINAL 90 Chapter 6: Loan Repayments S INGLE PERIOD PAYMENT ON PRINCIPAL AND 6.1 I NTEREST
Calculates the payment for a loan based on constant payments and a
constant interest rate. R ELATION BETWEEN NPER AND RATE WHEN THE PAYMENT 6.1.A P ERIOD IS LESS THAN ONE YEAR If you make monthly payments on a fouryear loan at an annual interest
rate of 24 %, use 24%/12 for RATE and 4*12 for NPER. If you make
annual payments on the same loan, use 12 % for RATE and 4 for NPER. T able 10: Annual rates have to be converted into the rates relevant to the
periodicity of repayments For the annualized rates
of:... If periodic payments
are: Then the rate and nper to
use Excel formulas are:
RATE Annual Rate 24% NPER 24/1 = 5*1= 24% 5 SemiAnnual (2
payments per year 24/2 = 5*2= 12% 10 Every four months (so
3 payments per year) 24/3 = 5*3 = 8% 15 Quarterly (4 payments
per year) 24/4 = 5*4 = 6% 20 Bimonthly (6
payments per year) 24/6 = 5*6 = 4% 30 Annual (so 1 per year) Number of years 5
Annual Rate 24%
Number of years 5
Annual Rate 24%
Number of years 5
Annual Rate 24%
Number of years 5
Annual Rate 24%
Number of years 5 91 Financial Analysis using Excel For the annualized rates
of:... If periodic payments
are: Then the rate and nper to
use Excel formulas are:
RATE Annual Rate 24%
Number of years 5 Monthly (12 payments
per year) NPER 24/12 = 5 * 12 = 2% 60 Payment on Principal only (not on interest) The function PPMT calculates the payment on the principal for a given
period for an investment based on periodic, constant payments and a
constant interest rate. This function can be accessed through the menu
option INSERT/FUNCTION/FINANCIAL/PPMT.
An example is shown in the next table.
The data requirements for PPMT and IPMT are similar. The
requirements are listed in the next subsection. 6.1.B P AYMENT ON INTEREST ONLY (NOT ON PRINCIPAL) The function IPMT calculates the payment on the interest for a given
period for an investment based on periodic, constant payments and a
constant interest rate. Access this function through the menu option
INSERT/FUNCTION/FINANCIAL/IPMT
The data requirements for PPMT and IPMT are similar. The
requirements are shown in the next figure. 92 Chapter 6: Loan Repayments Figure 85: Requirements of the functions PPMT and IPMT — Rate is the interest rate per payment period.
— Nper (“Number of Periods”) is the number of payment periods.
— Per (“Period”) is a positive whole number less than nper.
— PV (“Present Value”): in this context, the PV is the loan amount or
the principal.
— FV (“Future Value”): in this context, FV is the balance after the last
payment. This requirement is optional. If it left blank, then
the default of zero is used.
An example is shown in the next table. 6.1.C P AYMENT ON INTEREST AND PRINCIPAL The function PMT calculates the total loan repayment (principal plus
interest chares) in any period. The loan must be characterized by
periodic, constant payments and a constant interest rate. Access this
function through the menu option
INSERT/FUNCTION/FINANCIAL/PMT.
The information requirements are the same as for IPMT and PPMT (see
previous subsection) with one addition. PMT also needs information on
the due date of payments in relation to the period end and start. This 93 Financial Analysis using Excel information is input in the box “Type.” Figure 86: The function PMT Type: payments are due either at the end or the beginning of a period.
— Type = 0 or omitted, if payments are due at the end.
— Type = 1, if payments are due at the beginning
An example is shown in table at the end of this chapter. 6.2 L OAN REPAYMENTS (CUMULATIVE PAYMENT OVER
P ERIODS) 6.2.A C UMULATIVE REPAYMENT OF PRINCIPAL CUMPRINC calculates the cumulative repayments of principal from the
first period of the loan until a user chosen future period. The loan must
be characterized by periodic, constant payments and a constant interest
rate. Access this function through the menu option
INSERT/FUNCTION/FINANCIAL/CUMPRINC. 94 Chapter 6: Loan Repayments Figure 87: Requirements of the functions CUMIPMT and CUMPRINC — Rate is the interest rate per payment period.
— nper (“Number of Periods”) is the total number of payment periods in
the loan agreement.
— PV (“Present Value”): in this context, the PV is the loan amount or the
principal.
— Start_Period and End_period are the two periods (both inclusive) that
define the tome period whose cumulative payments you wish to
calculate.
An example is shown in the next table. 6.2.B C UMULATIVE INTEREST PAID ON A LOAN CUMIPMT calculates the cumulative interest payments from the first
period of the loan until a user chosen future period. The loan has to be
characterized by periodic, constant payments and a constant interest rate.
Access this function through the menu option
INSERT/FUNCTION/FINANCIAL/CUMIPMT
The information requirements are the same as for the function
CUMPRINC. An example is shown in the next table. 95 Financial Analysis using Excel Cumulative interest and principal paid on a loan between userchosen periods This amount may be estimated by adding CUMIPMT & CUMPRINC. An
example is shown in the next table. Table 11: Example of a car loan. This example is on the sheet “Car Loan” in the sample file
“Loan.xls.” Additional samples will be available at http://www.vjbooks.net/excel/samples.htm. Loan Terms: 20,000 dollars at 8.99% per year, to be repaid over 48 months
Principal or PV: 20000
Interest Rate per Year: 8.99%
Interest Rate per
Month: 0.75% Rate per
Repayment Period
(month) Number of Periods
for Loan Repayment: 48 Nper— is the
number of periods
(months)— 48 in
this case Function
Interest Payment (month 24) Principal Repayment (month 24) Interest plus Principal Payment (month 24) Interest Payment (month 37) Principal Repayment (month 37) Interest plus Principal Payment (month 37) Cumulative Interest Payment (months 124) Cumulative Principal Repayment (months 124) Result IPMT
PPMT
PMT
IPMT
PPMT
PMT
CUMIPMT
CUMPRINC 84.70 412.90 497.61 42.63 454.98 497.61 2666.00 9187.74 96 Chapter 6: Loan Repayments Cumulative Interest plus Principal Payment
(months 124) CUMIPMT +
CUMPRINC Cumulative Interest Payment (year 2 or months
1324) CUMIPMT Cumulative Principal Repayment (year 2 or
months 1324) CUMPRINC Cumulative Interest plus Principal Payment
(year 2 or months 1324) CUMIPMT +
CUMPRINC 11853.74 1205.10 4721.77 5926.87 Note that the total repayments are the same in months 24 and 37, the
share of interest goes down over time as more of the principal is repaid Summary of loan repayment formulae
Table 12: Summary of loan repayment formulae Payment
includes
interest PPMT
PMT
CUMIPMT
CUMPRINC 97 Period for which payment is calculated Yes IPMT Payment
includes
principal
Yes One
period No No One specific
period
defined by
the user Cumulative
over several
periods Financial Analysis using Excel R ELATED FUNCTIONS: RATE & NPER 6.3 RATE (“Interest Rate per period of an Annuity”) This function calculates the interest rate per period of an annuity.
Because the RATE is estimated using iterations, the result may be none,
one or more solutions. Location within INSERT/FUNCTION: FINANCIAL/RATE Figure 88: RATE pmt (payment): 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. The other information requirements are the same as in the
previous subsection.
Example:
Use this function to estimate the rate of a fouryear $8,000 loan with
monthly payments of $200: RATE (48, 200, 8000) = 0.77 %. This is the
monthly rate, because the period is monthly. The annual rate is
0.77%*12, which equals 9.24 %. 98 Chapter 6: Loan Repayments NPER (“Number of periods in an Investment”) This function calculates the number of periods for an investment based
on periodic, constant payments and a constant interest rate.
Location within INSERT/FUNCTION: FINANCIAL/NPER Figure 89: NPER pmt (payment): 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. The other information requirements are described in the
previous subsection. Examples
• NPER (12%/12, 100, 1000, 10000, 1) = 60
• NPER (1%, 100, 1000, 10000) = 60
• NPER (1%, 100, 1000) = 11 99 Financial Analysis using Excel M APPING BETWEEN SIMPLE AND COMPOUND 6.4 R ATES FOR THE SAME ANNUAL INTEREST EFFECT (“Effective Interest Rate”) This function calculates the effective annual interest rate, given the
nominal annual interest rate and the number of compounding periods per
year— Nominal_rate, and nperY, respectively, in the dialog reproduced in
the next figure.
This rate is equivalent (in terms of generating the same interest charges
during a year) to a oneyear simple interest rate applied to the same
principal with no withinyear compounding. Figure 90: Access this function through the menu option INSERT/ FUNCTION/ FINANCIAL/
EFFECT NOMINAL (“Nominal Interest Rate”) This function calculates the nominal annual interest rate, given the
effective rate and the number of compounding periods per year—
Effect_rate, and nperY, respectively, in the dialog reproduced in the next
figure.
This rate maps a one year simple interest rate to the equivalent (in terms
of generating the same interest charges during an year) nominal
compound interest rate if the interest is compounded in periods of less 1 00 Chapter 6: Loan Repayments than one year. Figure 91: Access this function through the menu option INSERT/ FUNCTION/ FINANCIAL/
NOMINAL Table 13: This Example is from the worksheet “Effective Nominal” in the sample file
“Loans.xls.” This example is on the sheet “Car Loan” in the sample file “Loan.xls.” EFFECTIVE
Terms: 14% nominal annual interest, compounded quarterly
Nominal Rate 14.0% Npery— number of compounding periods in an year 4 Effective Rate 14.8% NOMINAL
Terms: 14.8% effective annual interest after compounding quarterly
Effective Rate
Npery— number of compounding periods in an year 4 Effective Rate 1 01 14.8% 14.0% P age for Notes Chapter 7: Discount Cast Flows CHAPTER 7
D ISCOUNT CASH FLOWS The topics taught in this chapter are:
— PRESENT VALUES
— PV, NPV, XNPV
— DISCOUNT CASH FLOW ANALYSIS: RATES OF RETURN FOR
AN INVESTMENT/PROJECT
— IRR, MIRR, XIRR
— FUTURE VALUES
— FV, FVSCHEDULE
— DIFFERENCE BETWEEN FV AND FVSCHEDULE
— ANNUITIES — COMPARATIVE SUMMARY OF FUNCTIONS
— DEPRECIATION
— RISK ANALYSIS— “IFTHEN” SCENARIOS 7.1 P RESENT VALUES
Examples of the functions shown in this section are provided in the
sample file “Cash_Flow.xls.” 1 03 Financial Analysis using Excel PV This function calculates the present value of an investment. The present
value is the total amount that a series of future payments is worth now. Figure 92: PV Type: equals 0 or 1 and indicates when payments are due. This
information is optional. If left empty, the default of zero is used. Set type
equal to 0 If payments are due At the end of the period, 1 if payments are
due at the beginning of the period. Location within INSERT/FUNCTION: FINANCIAL/PV Rate: interest rate per period.
For example, if you obtain an automobile loan at a 10 % 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: number of periods
Fv (future value): the cash balance desired after the last payment. This
information is optional. If left empty, the default of zero is used. 1 04 Chapter 7: Discount Cast Flows pmt: The amount paid. The pmt data should be entered as positive if cash
is received (such as profits) from the investment and negative if cash is
spent on the investment (such as the initial investment, subsequent
spending (investment) at future time periods, etc. You should net, for
each year, recurrent expenditures including depreciation allowances from
recurrent revenues. Further, at least one of the cash flows must be
negative and at least one positive NPV This 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).
The primary difference between PV and NPV is that PV allows cash flows
to begin either at the end or at the beginning of the period. Unlike the
variable NPV cash flow values, PV cash flows must be constant
throughout the investment. Figure 93: NPV Location within INSERT/FUNCTION: FINANCIAL/NPV
Rate: discount rate over one period.
Value1, value2, ... must be equally spaced in time and occur at the end of
each period. 1 05 Financial Analysis using Excel The NPV investment begins one period before the date of the value1 cash
flow and ends with the last cash flow in the list. The NPV calculation is
based on future cash flows. If the first cash flow occurs at the beginning
of the first period, this flow's value must not be included in the arguments
for the NPV function. Instead, you should add this value to the results of
the NPV function. XNPV This function calculates the net present value for a schedule of cash flows
that is not necessarily periodic. Use this function instead of the NPV
when the cash flows from the investment/project may not be at periodic
intervals (or are not accounted for on a periodic basis). Figure 94: XNPV Location within INSERT/FUNCTION: FINANCIAL/XNPV
Same as above. In addition, you need to supply the reinvestment rate.
Notes:
— An annuity is a series of constant cash payments made over a
continuous period. For example, a car loan or a mortgage is an
annuity. For more information, see the description for each
annuity function.
— In annuity functions, a negative number represents cash paid out; a
positive number represents cash received. 1 06 Chapter 7: Discount Cast Flows — The primary difference between PV and NPV is that PV allows cash
flows to begin either at the end or at the beginning of the
period. Unlike the variable NPV cash flow values, PV cash
flows must be constant throughout the investment.
— IRR is the rate for which NPV equals zero
— XIRR is the rate for which XNPV equals zero D ISCOUNT CASH FLOW ANALYSIS: RATES OF 7.2 R ETURN FOR AN INVESTMENT/PROJECT IRR This function is used when the cash flows occur (or are estimated as in an
annual report) at periodic intervals. (Typically, the period is a year; but
the period could be monthly, quarterly, etc). Figure 95: IRR The default initial guess is 10% or 0.10. Typically one does not enter any
number as a guess
Location within INSERT/FUNCTION: FINANCIAL/IRR
The data should be entered as positive if cash is received (such as profits)
from the investment and negative if cash is spent on the investment (such
as the initial investment, subsequent spending (investment) at future 1 07 Financial Analysis using Excel time periods, etc. You should net, for each year, recurrent expenditures
including depreciation allowances from recurrent revenues. Further, at
least one of the cash flows must be negative and at least one must be
positive. MIRR A good measure of the rate of return should include the cost of raising
capital (an outflow) and returns from reinvestment of the profits from the
investment (an inflow). The MIRR function includes the cost of funds and
the earnings on profit reinvestment. The function is an extension of the
IRR function.
For example, over a 10 period investment, the profits earned in year 2 will
be reinvested for eight years. The cash inflows may be (re)invested in
interestearning assets like bonds, money market, etc.
On the other hand, the rate of return should also consider the return on
the next best use of the funds invested. (Alternatively, as may be the
case, the interest cost of borrowing these funds).
Location within INSERT/FUNCTION: FINANCIAL/MIRR
Same as for IRR. In addition, you need to supply the borrowing
(financing) and reinvestment rates. Figure 96: MIRR 1 08 Chapter 7: Discount Cast Flows XIRR Use this function instead of the IRR when the cash flows from the
investment/project may not be at periodic intervals (or are not accounted
for on a periodic basis). Figure 97: XIRR Location within INSERT/FUNCTION: FINANCIAL/XIRR
Same as for IRR. In addition, you need data on the dates when the cash
flow will occur.
Notes:
— If a #NUM! error is displayed it may indicate that the
underlying algorithm is generated an estimate on the 20th
iteration/try for IRR (and 100th for XIRR) that was too far from
the estimate on the 19th (or 99th for XIRR) to consider the
estimate to be the “final” correct estimate.
— IRR corresponds to the function NPV. IRR is the rate of return
at which NPV=zero.
— XIRR corresponds to the function NPV. XIRR is the rate of
return at which XNPV=zero. 1 09 Financial Analysis using Excel F UTURE VALUES 7.3 FV function This function calculates the “endofproject” or “Future Value” of a set of
periodic investment. The function can be used only if all the investments
are— of the same amount, at the same interest rate, and include principal
and interest only. Funds received are included as positive numbers and
fund outflows as negative numbers.
This function calculates the “endofproject” or “Future Value” of a set of
periodic investment. The function can be used only if all the investments
are— of the same amount, at the same interest rate, and include principal
and interest only. Funds received are included as positive numbers and
fund outflows as negative numbers.
You can also use the function to evaluate the Future Value of a Present
Value. Follow the menu path INSERT/FUNCTION/FINANCIAL/FV9 9 Suppose you want to save money for a special project occurring a year from now. You
deposit $1,000 into a savings account that earns 6 percent annual interest
compounded monthly (monthly interest of 6%/12, or 0.5%). You plan to deposit $100
at the beginning of every month for the next 12 months. How much money will be in
the account at the end of 12 months?
FV(0.5%, 12, 100, 1000, 1) equals $2301.40 1 10 Chapter 7: Discount Cast Flows Figure 98: The FV dialog FV(interest rate per period, NPER  the number of payments in an year,
PER  the periodic payment or PV  the present value of the series of
payments (include PER or PV), TYPE period extremity at which payment
is due with 0=“period end” and 1= “period beginning”) Rate versus NPER If you make monthly payments on a fouryear loan at 12 percent annual
interest, use 12%/12 for RATE and 4*12 for NPER. If you make annual
payments on the same loan, use 12% for RATE and 4 for NPER. FVSCHEDULE function This function calculates the “endofproject” or “Future Value” of one
initial investment at interest rates that may differ across periods. The
function uses a series of compound interest rates to evaluate the Future
Value. Figure 99: The FVSCHEDULE dialog Location: INSERT/FUNCTION/FINANCIAL/FVSCHEDULE 1 11 Financial Analysis using Excel FVSCHEDULE(Principal or Present Value, set of interest rates over the
number of periods of the investment—this number should equal the
number of periods of the investment and is typically referenced from a
range of cells that contain information on the rates as numbers in the
range 0 to 1)
Example: FVSCHEDULE(1,{0.09, 0.11, 0.1}) equals 1.33089 Difference between FV and FVSCHEDULE
Table 14: Difference between FV and FVSCHEDULE FV Parameter/Issue FVSCHEDULE Nature of the
investments Periodic, constant One time only Rate applied Constant Variable Periods Needs information only on
total number of periods Needs information on the
rate during each period A NNUITIES — COMPARATIVE SUMMARY OF 7.4 F UNCTIONS
Table 15: Annuities — comparative summary of functions Payment
amounts Periodicity of
payments Interest rates Same May Fixed Variable Constant May
time
across
differ
each differ time
period each periods period periods across
periods
period Consideration of
reinvestment
Cash inflows are
reinvested;
borrowing costs
included Present values of
multiperiod cash
flows 1 12 Chapter 7: Discount Cast Flows Payment
amounts Periodicity of
payments Interest rates Same May Fixed Variable Constant May
each differ time
time
across
differ
period each periods period periods across
period
periods
PV
NPV
XNPV
Estimation of implicit
or explicit interest
rates
RATE
IRR
MIRR
XIRR
Future value
estimation
FV
FVSCHEDULE
Estimating number of
periods
NPER
Estimating
repayments for a loan
IPMT
PPMT
PMT
CUMIPMT
CUMPRINC 1 13 Consideration of
reinvestment
Cash inflows are
reinvested;
borrowing costs
included Financial Analysis using Excel D EPRECIATION 7.5 7.5.A D EPRECIATION OF AN ASSET OVER A SINGLE PERIOD Straightline and Sumofyear’s depreciation methods SLN function: Straight line depreciation Estimates depreciation during a particular period. All periods have the
same depreciation amount.
Location within INSERT/FUNCTION: FINANCIAL/SLN
Cost: initial cost of asset,
Salvage: value of asset at end of depreciation period,
Life: life of asset in number of periods) SYD function: Sumofyears' digit method Estimates depreciation during a particular period. Depreciation amounts
decline over time.
Location within INSERT/FUNCTION: FINANCIAL/SYD
Same as for SLN, plus: Per– the period for which depreciation amount
needs to be calculated. 1 14 Chapter 7: Discount Cast Flows Figure 100: Difference between SLN and SYD for a typical asset
Comparing depreciation scedules across different methods $ Depreciation allowance for period $16,000
$14,000 Straight line (SLN) $12,000 Sumofyears (SYD) $10,000
$8,000
$6,000
$4,000
$2,000
$0
1 2 3 4 5 6 7 8 9 Period from intial investment 7.5.B D EPRECIATION OF AN ASSET OVER SPECIFIED PERIOD USING
D ECLINING BALANCE METHODS Fixed declining balance method Select the option INSERT/FUNCTION/FINANCIAL/DB Figure 101: The DB function 1 15 10 Financial Analysis using Excel Month: number of months in the first year. If omitted, Excel defaults to
12. Figure 102: Comparing SYD and DB
Comparing depreciation scedules across different methods $16,000 $ Depreciation allowance for period $14,000 Sumofyears (SYD) $12,000 Fixed Declining Balance (DB) factor=1 $10,000
$8,000
$6,000
$4,000
$2,000
$0
1 2 3 4 5 6 7 8 9 10 Period from intial investment Variable declining balance method You can choose the factor at which the balance declines. The default is
two, that is, “Double Declining.”
Location: INSERT/FUNCTION/FINANCIAL/DDB. 1 16 Chapter 7: Discount Cast Flows Figure 103: The DDB function This function this method computes depreciation at a higher rate than the
fixed declining balance function. The depreciation is much higher than
SLN, SYD, and DB in the first few periods. Example:
Assume the following parameters define a piece of capital equipment:
— Initial Cost =$100, 000
— Salvage Value =$20, 000
— Life =10 yrs
The different depreciation amounts per period, estimated using different
depreciation functions are shown in the table below and the next figure. Table 16: Comparing SLN, SYD, DB and DDB results Method— > Straight Sumof Fixed
Double
line
years
Declining Declining
Period
(SLN) (SYD)
Balance Balance
(DB)
(DDB)
factor=2 Double
Declining
Balance
(DDB with
factor=1.5) Double
Declining
Balance
(DDB with
factor=0.5) $15, 000 $5, 000 2 Depreciation $8, 000 $14, 545 $14, 900 $20, 000
in specific
$8, 000 $13, 091 $12, 680 $16, 000
period $12, 750 $4, 750 3 $8, 000 $11, 636 $10, 791 $12, 800 $10, 838 $4, 513 4 $8, 000 $10, 182 $9, 183 $9, 212 $4, 287 1 1 17 $10, 240 Financial Analysis using Excel Method— > Straight Sumof Fixed
Double
line
years
Declining Declining
Period
(SLN) (SYD)
Balance Balance
(DB)
(DDB)
factor=2 Double
Declining
Balance
(DDB with
factor=1.5) Double
Declining
Balance
(DDB with
factor=0.5) 5 $8, 000 $8, 727 $7, 815 $8, 192 $7, 830 $4, 073 6 $8, 000 $7, 273 $6, 650 $6, 554 $6, 656 $3, 869 7 $8, 000 $5, 818 $5, 659 $5, 243 $5, 657 $3, 675 8 $8, 000 $4, 364 $4, 816 $972 $4, 809 $3, 492 9 $8, 000 $2, 909 $4, 098 $0 $4, 087 $3, 317 10 $8, 000 $1, 455 $3, 488 $0 $3, 162 $3, 151 Figure 104: Value of an asset after depreciation— comparing SLN, SYD, DB, and DDB 1 18 Chapter 7: Discount Cast Flows Allowing for a switch over between declining balances and straight line –the VDB
function This function uses a general declining method with switch over to straight
line if depreciation goes above straight line before the salvage/end date.
Location: INSERT/ FUNCTION/ FINANCIAL/ VDB Figure 105: VDB Select the option INSERT/FUNCTION/FINANCIAL/VDB (cost of
investment, salvage cost, starting period which equals zero for 1st
period’s depreciation, end of period which equals n for period n’s
depreciation, factor, TRUE if you do not want to switch to Straight Line
and FALSE or omitted otherwise)
A comparison of variable declining depreciation is shown in the next table. Table 17: VDB with factors of 1 and 1.5 Period General declining method with
switch over to straight line if
depreciation goes above straight
line before salvage date (a use of
VDB; using factor=1.5) 1 $10, 000.00 $15, 000.00 2 $9, 000.00 $12, 750.00 3 1 19 General declining method with
switch over to straight line if
depreciation goes above straight
line before salvage date (a use of
VDB; using factor=1) $8, 100.00 $10, 837.50 Financial Analysis using Excel Period General declining method with
switch over to straight line if
depreciation goes above straight
line before salvage date (a use of
VDB; using factor=1.5) 4 $7, 557.14 $9, 211.88 5 $7, 557.14 $7, 830.09 6 $7, 557.14 $6, 655.58 7 $7, 557.14 $5, 657.24 8 $7, 557.14 $4, 808.66 9 $7, 557.14 $4, 087.36 10 7.6 General declining method with
switch over to straight line if
depreciation goes above straight
line before salvage date (a use of
VDB; using factor=1) $7, 557.14 $3, 161.69 R ISK ANALYSIS— “IFTHEN” SCENARIOS
Discount cash flow analysis has to take into account different scenarios
because most of the input information is based on asyet unknown future
cash flows and future financial parameters. A method for including the
different possible future scenarios is available through the menu option
TOOLS/SCENARIOS. Refer to 15.1. 1 20 Chapter 7: Discount Cast Flows CHAPTER 8
S ECURITIES FUNCTIONS In this chapter, you will learn about the following topics:
— CALCULATING NUMBER OF DAYS (BETWEEN ISSUE/
PURCHASE/ NEXT COUPON/SETTLEMENT)
— BOND PRICES RESPONSIVENESS TO YIELD
— PRICE, YIELD, AND DISCOUNT RATES FOR A SECURITY
— INTEREST ACCRUALS
— T BILL FORMULAE 8.1 I NFORMATION REQUIREMENTS
This section explains the various information/data requirements for the
functions taught in this chapter.
— Issue is the date the security was issued into the primary
securities market.
— Settlement is the date (after the issue date) when the current
owner purchased the security.
— Maturity is the date the securities legal obligations end. For
some securities, the maturity date may be the only date when a
payment is made. A 30year bond issued on January 1, 1996 is 1 21 Financial Analysis using Excel purchased by a buyer six months postissue. The issue date
would be January 1, 1996, the settlement date would be July 1,
1996, and the maturity date would be January 1, 2026, 30 years
after the January 1, 1996 is the date when the security was
issued (first sold)— the issue date.
— Date of first coupon: is the security's first coupon date.
Furthermore, in chronological descending order, maturity > first
coupon > settlement > issue.
— Date of last coupon: the security's last coupon date. In addition,
in chronological descending order, maturity > settlement > date
of last interest payment
— Rate is the security's annual coupon rate. (Only relevant for
securities that make coupon payments.)
— Discount Rate is the discount rate implicit from the security.
— Price is the security's price per $100 face value.
— amount invested (Investment) or Present Value (PV) is the
amount invested on the date th security was purchased.
— Yield is the annual yield or return on the security
— Redemption is the security's redemption value per $100 face
value. (Only relevant for securities that hold value at maturity.
For some securities, Redemption is the security's redemption value
per $100 face value.) 1 22 Chapter 7: Discount Cast Flows — Frequency is the number of coupon payments per year.
— If annual, then frequency = 1
— If semiannual, then frequency = 2
— If quarterly, then frequency = 4
— If monthly, then frequency= 12
— Basis is the type of day count. The different optional values are
listed in the next table. Table 18: Codes for type of day count Basis Day count 0 or
omitted 30/360 or US basis: 1 Actual/Actual: 30 days in the month and 360 days in the year. Actual number of days in the month and Actual
number of days in the year.
2 Actual/360:
Actual number of days in the month and 360 days in
the year. 3 Actual/365:
Actual number of days in the month and 365 days in
the year. 4 30360 or European
30 days in the month and 360 days in the year. 1 23 Financial Analysis using Excel C OUPONRELATED FUNCTIONS 8.2 COUPDAYBS This function calculates the number of days from the beginning of the
coupon period to the settlement date10. Period calculated by the function
COUPDAYBS = Days from beginning of coupon period to the settlement
(purchase) Location within INSERT/FUNCTION: FINANCIAL/COUPDAYBS Figure 106: The information requirements for the functions COUPDAYBS, COUPDAYS,
COUPDAYSNC 10 Assume that a bond is defined by the following terms: January 25, 1998 is the date
when the bond was traded (the settlement date). November 15, 1999 is the date
when the bond will pay back in full and will close (the maturity date). The security’s
interest (and coupon payment) is calculated on a semiannual basis  that is, the
security has a semiannual coupon. The type of day count basis is actual number of
days in the month and actual number of days in the year  Actual / Actual basis. For
this bond, the number of days from the beginning of the coupon period to the
settlement date is:
COUPDAYBS ("1/25/1998”, “11/15/1999”, 2, 1) = 71 1 24 Chapter 7: Discount Cast Flows Data requirements
• settlement date
• maturity date • frequency of payments • basis See section 8.1 on page 116 for a definition of each of the information
requirements. COUPDAYS This function calculates the number of days in the coupon period that
contains the settlement date11. Period calculated by the function
COUPDAYS = Days in coupon period Location within INSERT/FUNCTION: FINANCIAL/COUPDAYS
Data requirements
• settlement date
•
• 11 maturity date
frequency of payments Continuing the example from the previous footnote. For this bond, the number of
days in the coupon period that contains the settlement date is:
COUPDAYS ("1/25/1998”, “11/15/1999”, 2, 1) = 181 1 25 Financial Analysis using Excel • basis (Same as for COUPDAYBS.) See section 8.1 on page 116 for a definition of each of the information
requirements. COUPDAYSNC This function calculates the number of days from the settlement date to
the next coupon date12. Period calculated by the function
COUPDAYSNC= Days to next coupon after settlement (purchase) Location within INSERT/FUNCTION: FINANCIAL/COUPDAYSNC
Data requirements
• settlement date
• maturity date • frequency of payments • basis See section 8.1 on page 116 for a definition of each of the information
requirements. 12 Continuing the example from the previous footnote. For this bond, the number of
days from the settlement date to the next coupon date is:
COUPDAYSNC (“1/25/1998”, “11/15/ 1999”, 2, 1) = 110 1 26 Chapter 7: Discount Cast Flows COUPNCD This function calculates a number that represents the next coupon date
after the settlement date13. Period calculated by the function
COUPNCD = Next Coupon Date Location within INSERT/FUNCTION: FINANCIAL/COUPNCD
Data requirements
• settlement date
• maturity date • frequency of payments • basis Same as the previous two functions, but the output is a number — a serial
number for the date. To view the number as a date, click Cells on the
Format menu, click Date in the Category box, and then click a date format
in the Type box. See section 8.1 on page 116 for a definition of each of the information
requirements. 13 Continuing the example from the previous footnote. For this bond, the next coupon
date after the settlement date (in the 1900 date system) is:
COUPNCD (“1/25/1998”, “11/15/1999”, 2, 1) = 35930.
To view the number as a date (May 15, 1998) instead of a serial number (35930),
click Cells on the Format menu, click Date in the Category box, and then click a date
format in the Type box 1 27 Financial Analysis using Excel COUPPCD This function calculates a number that represents the previous coupon
date before the settlement date14. Period calculated by the function
COUPPCD = Previous Coupon Date Location within INSERT/FUNCTION: FINANCIAL/COUPPCD
Data requirements
• settlement date
• maturity date • frequency of payments • basis Same as for COUPNCD — see above. See section 8.1 on page 116 for a definition of each of the information
requirements. 14 Continuing the example from the previous footnote. For this bond, the previous
coupon date before the settlement date (in the 1900 date system) is:
COUPPCD (“1/25/1998”, “11 /15/1999”, 2, 1) = 35749. or November 15, 1997
To view the number as a date (November 15, 1997) instead of a serial number
(35749), click Cells on the Format menu, click Date in the Category box, and then
click a date format in the Type box. 1 28 Chapter 7: Discount Cast Flows COUPNUM This function calculates the number of coupons payable between the
settlement date and maturity date, rounded up to the nearest whole
coupon15. Number calculated by the function
COUPNUM = Coupon + Number of Coupon Payments from “Now”
Till Maturity Location within INSERT/FUNCTION: FINANCIAL/COUPNUM
Data requirements
• settlement date
• maturity date • frequency of payments • basis Same as for COUPNCD — see above. See section 8.1 on page 116 for a definition of each of the information
requirements. Table 19: Example of Coupon functions Issue Date 15 1/25/1998 Continuing the example from the previous footnote. For this bond, the number of
coupon payments is:
COUPNUM (“1/25/1998”, “11/15/1999”, 2, 1) = 4. 1 29 Financial Analysis using Excel Maturity Date 11/15/1999 Settlement Date 3/14/1999 Frequency 2 Basis …make sure that the dates are in date format. Go to the menu option
FORMAT/CELLS/NUMBER. Select the type “Date.” 1 FUNCTIONS RESULT COUPDAYBS 119 ...number of days from the beginning of the coupon period to the
settlement date COUPDAYS 181 ...number of days in the coupon period that contains the settlement
date COUPDAYSNC 62 ...number of days from the settlement date to the next coupon date COUPNCD 36295 …implies that Excel has returned a “Date Serial Number” instead of
the date. If this happens, then go to FORMAT/CELLS/NUMBER.
Select the type “Date.” The serial number will change to the date
shown on the right COUPPCD 11/15/1998 …previous coupon date before the settlement date COUPNUM 2 …number of coupons from settlement to maturity DURATION & MDURATION (Bond price’s response to changes in yield) functions This function calculates the Macaulay duration for an assumed par value
of $10016. Duration is the weighted average of the present value of future 16 Assume that a bond is defined by the following terms: January 1, 1998 is the date
when the bond was traded (the settlement date). January 1, 2006 is the date when
the bond will pay back in full and will close (the maturity date) 1 30 Chapter 7: Discount Cast Flows cash flows. The function measures a bond price's response to changes in
the annual yield.
Location: INSERT/FUNCTION/FINANCIAL/DURATION or
MDURATION. Figure 107: Data requirements for DURATION and MDURATION 8 % coupon. 9.0 % yield. Frequency is semiannual. The type of day count basis is
actual number of days in the month and actual number of days in the year Actual / actual basis (so the value of basis = 1).
 For this bond, the duration (in the 1900 date system) is:
DURATION (“1/1/1998”, “1/1/2006”, 0.08, 0.09, 2, 1) = 5.993775
 For this bond, the modified duration is:
MDURATION (“1/1/1998”, “1/1/2006”, 0.08, 0.09, 2, 1) = 5.73567 1 31 Financial Analysis using Excel P RICE VERSUS YIELD, & INTEREST CALCULATIONS 8.3 S ECURITY THAT PAYS PERIODIC INTEREST (COUPON PAYING 8.3.A B OND) YIELD This function calculates the yield on a security that pays periodic interest,
that is, bonds17.
Location within INSERT/FUNCTION: FINANCIAL/YIELD
Data requirements
• settlement date
•
• price or par value • redemption amount • frequency of payments • 17 maturity date basis Assume that a bond is defined by the following terms: February 15, 1999 is the date
when the bond was traded (the settlement date). November 15, 2007 is the date
when the bond will pay back in full and will close (the maturity date)
5.75 % coupon. 95.04287 price. $100 redemption value. Frequency is semiannual.
The type of day count basis is 30 days in the month and 360 days in the year  30
/ 360 basis (so the value of basis = 0).
For this bond, the yield is:
YIELD (“2/15/1999”, “11/15/2007”, 0.0575, 95.04287, 100, 2, 0) = 0.065 or 6.5
% 1 32 Chapter 7: Discount Cast Flows • rate, where:
Rate is the security's annual coupon rate, Price is the security's
price per $100 face value, and Redemption is the security's
redemption value per $100 face value. See section 8.1 on page 116 for a definition of each of the information
requirements. PRICE This function calculates the price per $100 face value on a security that
pays periodic interest.
Location within INSERT/FUNCTION: FINANCIAL/PRICE
Data requirements
• settlement date
• maturity date • annual rate • yield • redemption amount •
frequency of payments • basis See section 8.1 on page 116 for a definition of each of the information
requirements. ACCRINT This function calculates the accrued interest for a security that pays 1 33 Financial Analysis using Excel periodic interest.
Location within INSERT/FUNCTION: FINANCIAL/ACCRINT
Data requirements
• issue date
• settlement date • date of first payment • annual rate • par value. If you omit par value a default of $1,000 is used
See section 8.1 on page 116 for a definition of each of the information
requirements. Price and Yield for odd (long or short) first or last period Bonds Odd First Period Price per $100 face value
Location within INSERT/FUNCTION: FINANCIAL/ODDFPRICE
Data requirements
• settlement date
• maturity date • rate • yield • redemption amount • frequency of payments • basis 1 34 Chapter 7: Discount Cast Flows • date of first coupon, where: Date of first coupon: is the security's first coupon date. Furthermore, , in
chronological descending order, maturity > first coupon > settlement >
issue. See section 8.1 on page 116 for a definition of each of the information
requirements. Yield Location within INSERT/FUNCTION: FINANCIAL/ODDFYIELD
Data requirements
• settlement date
• maturity date • rate • price • redemption amount • frequency of payments • basis • date of first coupon, where: Date of first coupon: is the security's first coupon date. Furthermore, in
chronological descending order, maturity > first coupon > settlement >
issue See section 8.1 on page 116 for a definition of each of the information
requirements. 1 35 Financial Analysis using Excel Odd Last Period Price per $100 face value
Location within INSERT/FUNCTION: FINANCIAL/ ODDLPRICE
Data requirements
• settlement date
• maturity date • rate • yield • redemption amount • frequency of payments • basis • date of last coupon, where: Date of last coupon: the security's last coupon date. In addition, , in
chronological descending order, maturity > settlement > date of last
interest payment See section 8.1 on page 116 for a definition of each of the information
requirements. Yield Location within INSERT/FUNCTION: FINANCIAL/ODDLYIELD
Data requirements
• settlement date
• maturity date • rate 1 36 Chapter 7: Discount Cast Flows • price • redemption amount • frequency of payments • basis • date of last coupon, where: Date of last coupon: the security's last coupon date. Furthermore,
maturity > settlement > date of last interest payment See section 8.1 on page 116 for a definition of each of the information
requirements. 1 37 Financial Analysis using Excel A D ISCOUNTED SECURITY 18 W HICH MAY PAY REDEMPTION AT 8.3.B M ATURITY DISC This function calculates the discount rate for a security19.
Location within INSERT/FUNCTION: FINANCIAL/ DISC 18 Assume that a bond is defined by the following terms:
• February 15, 1999 is the date when the bond was traded (the settlement
date) • March 1, 1999 is the date when the bond will pay back in full and will close
(the maturity date) • 5.25 % discount rate • $100 redemption value • The type of day count basis is actual number of days in the month and 360
days in the year  Actual / 360 basis (so the value of basis = 2) basis The bond price (in the 1900 date system) is:
PRICEDISC (“2/15/1999”, “3/1/1999”, 0.0525, 100, 2) = 99.79583
19 Assume that a bond is defined by the following terms: February 15, 1998 is the date
when the bond was traded (the settlement date). June 10, 1998 is the date when the
bond will pay back in full and will close (the maturity date). $97.975 is the market
price of the security. $100 redemption value. The type of day count basis is actual
number of days in the month and 360 days in the year  Actual / 360 basis (so the
value of basis = 2) basis.
For this bond, the discount rate is:
DISC (“2/15/1998”, “6/10/1998”, 97.975, 100, 2) = 0.063391 or 6.3391 % 1 38 Chapter 7: Discount Cast Flows Figure 108 Data requirements
• settlement date
• maturity date • basis • price • redemption amount, where: Price is the security's price per $100 face value and Redemption is the
security's redemption value per $100 face value. See section 8.1 on page 116 for a definition of each of the information
requirements. PRICEDISC This function calculates the price per $100 face value of a discounted
security
Location within INSERT/FUNCTION: FINANCIAL/ PRICEDISC
Data requirements
• settlement date
•
• 1 39 maturity date
discount rate Financial Analysis using Excel • annual yield • redemption amount YIELDDISC This function calculates the annual yield for a discounted security
Location within INSERT/FUNCTION: FINANCIAL/ YIELDDISC
Data requirements
• settlement date
• maturity date • price per $100 face value • redemption amount • basis See section 8.1 on page 116 for a definition of each of the information
requirements. 1 40 Chapter 7: Discount Cast Flows S ECURITY THAT PAYS INTEREST AT MATURITY 20 8.3.C PRICEMAT This function calculates the price per $100 face value of a security that
pays interest at maturity
Location within INSERT/FUNCTION: FINANCIAL/ PRICEMAT
Data requirements
• settlement date
• maturity date • issue date • discount rate • annual yield See section 8.1 on page 116 for a definition of each of the information
requirements. 20 Assume that a bond is defined by the following terms: February 15, 1999 is the date
when the bond was traded (the settlement date). April 13, 1999 is the date when the
bond will pay back in full and will close (the maturity date)
November 11, 1998 is the date when the security was issued (first sold) the issue
date. 6.1 % The security’s interest (and coupon payment) is calculated on a
semiannual basis  that is, the security has a semiannual coupon. 6.1 % yield.
The type of day count basis is 30 days in the month and 360 days in the year  30
/ 360 basis (so the value of basis = 0)
For this bond, the price is:
PRICEMAT (“2/15 /1999”, “4/13/1999”, “11/11/1998”, 0.061, 0.061, 0) =
99.98449888 1 41 Financial Analysis using Excel YIELDMAT This function calculates the annual yield of a security that pays interest
at maturity
Location within INSERT/FUNCTION: FINANCIAL/ YIELDMAT
Data requirements
• settlement date
• maturity date • issue date • discount rate • price per $100 face value (par value) See section 8.1 on page 116 for a definition of each of the information
requirements. ACCRINTM This function calculates the accrued interest for a security that pays
interest at maturity21.
Location within INSERT/FUNCTION: FINANCIAL/ ACCRINTM 21 A treasury note has the following terms: April 1, 1998 is the date when the security
was issued (first sold) the issue date. June 15, 1998 is the date when the bond will
pay back in full and will close (the maturity date). 10.0 % coupon. $1,000 par value.
The type of day count basis is actual number of days in the month and 365 days in
the year  Actual / 365 basis (so the value of basis = 3).
For this treasury note, the accrued interest (in the 1900 date system) is:
ACCRINTM (“4/1/1998”, “6/15/1998”, 0.1, 1000, 3) = 20.54795 1 42 Chapter 7: Discount Cast Flows Figure 109 Data requirements
• settlement date
• issue date • basis • discount rate • price per $100 face value (par value). If you omit par, ACCRINTM
uses $1,000. See section 8.1 on page 116 for a definition of each of the information
requirements. 1 43 Financial Analysis using Excel F ULLY INVESTED SECURITY 8.3.D INTRATE This function calculates the interest rate for a fully invested security22.
Location within INSERT/FUNCTION: FINANCIAL/ INTRATE
Data requirements
• settlement date
• maturity date • discount rate • amount invested (Investment) • basis See section 8.1 on page 116 for a definition of each of the information
requirements. RECEIVED This function calculates the amount received that is, the redemption) at 22 Assume that a bond is defined by the following terms: February 15, 1999, settlement
(and also the issue) date. May 15, 1999 is the date when the bond will pay back in
full and will close (the maturity date). 1, 000, 000 investment. 5.75 % discount rate.
The type of day count basis is actual number of days in the month and 360 days in
the year  Actual / 360 basis (so the value of basis = 2).
For this bond, the total amount received at maturity (in the 1900 date system) is:
RECEIVED (“2/15/1999”, “5/15/1999”, 1000000, 0.0575, 2) = 1, 014, 420.266,
or $1, 014, 420.27 1 44 Chapter 7: Discount Cast Flows maturity for a fully invested security.
Location within INSERT/FUNCTION: FINANCIAL/ RECEIVED
Data requirements
• settlement date
• maturity date • discount rate • amount invested (Investment) • basis See section 8.1 on page 116 for a definition of each of the information
requirements. I NFORMATION REQUIREMENTS FOR LOAN 8.4 R EPAYMENT AND SECURITIES FUNCTIONS
Table 20: Summary of information requirements for loan repayment and securities functions Information requirements for function COUPDAYBS
COUPDAYS
COUPDAYSNC
COUPNCD
COUPPCD 1 45 Interest Discount Yields and
interest/ discount
rates Yield Basis # of periods Frequency,
and related Frequency of
payments pa Redemption
amount Investment
amount Any amount paid
at maturity Par/coupon Price Prices and par values Maturity Settlement Issue Function First coupon Dates Financial Analysis using Excel Information requirements for function COUPNUM
DURATION
MDURATION
PRICE
PRICEDISC
PRICEMAT
RECEIVED
YIELD
YIELDDISC
YIELDMAT
ACCRINT
ACCRINTM
INTRATE
DISC T BILL FORMULAE 8.5 TBILLEQ function This function estimates the “bondequivalent” yield for a TBill.
Location within INSERT/FUNCTION: FINANCIAL/TBILLEQ
Data requirements
• settlement date
• maturity date 1 46 Interest Discount Yields and
interest/ discount
rates Yield Basis # of periods Frequency,
and related Frequency of
payments pa Redemption
amount Investment
amount Any amount paid
at maturity Par/coupon Price Prices and par values Maturity Settlement Issue Function First coupon Dates Chapter 7: Discount Cast Flows • discount rate See section 8.1 on page 116 for a definition of each of the information
requirements. Example:
TBILLEQ (“3/31/1999”, “6/1/1999”, 0.0914) = 0.094151 or 9.4151 % Figure 110: TBILLEQ TBILLPRICE function This function evaluates the price per $100 face value (this value is the
amount the Treasury – the issuer of the TBill  has to pay you at
maturity) of a TBill, given the Settlement and Maturity dates, and the
Discount Rate.
The price must be less than 100, because an investor will only purchase a
TBill if the amount she receives at maturity (which is always $100 per
$100 face value) is more than the market price of the T–Bill. Figure 111: TBILLPRICE Location within INSERT/FUNCTION: FINANCIAL/ TBILLPRICE 1 47 Financial Analysis using Excel Data requirements
• settlement date
• maturity date • discount rate See section 8.1 on page 116 for a definition of each of the information
requirements. For Example, if 9% (or 0.09) is the discount rate on a TBill purchased on
3/31/1999 maturing on 6/1/1999, then the price per $100 face value of the
TBill is: TBILLPRICE (“3/31/1999”, “6/1/1999”, 0.0914) = 98.45 Table 21: Example of functions for estimating the bondequivalent TBill yield and the market
price (par value) of a TBill23. Settlement Date 3/31/1999 Maturity Date 6/1/1999 Discount Rate 9.14% Function Result TBILLEQ 9.42% The 9.14% yield of the TBill is equivalent to a
Bond with a yield of 9.42% 23 The example is in the worksheet “TBill formulas given discount” in the sample file “TBill.xls.” Additional samples will be available at
http://www.vjbooks.net/excel/samples.htm. 1 48 Chapter 7: Discount Cast Flows TBILLPRICE 98.43 Price per $100 face value— this value is the
amount the Treasury has to pay you at maturity—
of a TBill TBILLYIELD function: Yield for a treasury bill (given market price or par value) This function measures the yield of a TBill, given the Settlement and
Maturity dates, and the Treasury bill's Price per $100 face value.
Location within INSERT/FUNCTION: FINANCIAL/TBILLYIELD. Figure 112: TBILLYIELD Data requirements
• settlement date
• maturity date • Price per $100 face value See section 8.1 on page 116 for a definition of each of the information
requirements. For Example, if 98.45 is the market price of the security per $100 face
value of a TBill purchased on 3/31/1999 maturing on 6/1/1999, then:
TBILLYIELD (“3/31/1999”, “6/1/1999”, 98.45) = 0.091417 or 9.1417 % 1 49 Financial Analysis using Excel Table 22: TBill Yield. The example is in the worksheet “TBill Yield” in the sample file “TBill.xls.” Settlement Date 3/31/1999 Maturity Date 6/1/1999 Price 98.40 Function Result TBILLYIELD 9.44% (market price of the security per $100 face value) The yield on the TBill 1 50 P age for Notes Financial Analysis using Excel CHAPTER 9
F UNCTIONS FOR BASIC STATISTICS This chapter discusses the following topics:
— “AVERAGED” MEASURES OF CENTRAL TENDENCY
— AVERAGE, TRIMMED MEAN, HARMONIC MEAN, GEOMETRIC
MEAN
— LOCATION MEASURES OF CENTRAL TENDENCY
— MEDIAN, MODE
— OTHER LOCATION PARAMETERS
— QUARTILE, PERCENTILE
— MAXIMUM VALUE, MINIMUM VALUE, LARGE, SMALL
— RANK OR RELATIVE STANDING OF EACH CELL WITHIN THE
RANGE OF A SERIES
— MEASURES OF DISPERSION (STANDARD DEVIATION &
VARIANCE)
— STDEV, VAR, STDEVA, VARA, STDEVP, VARP, STDEVPA,
VARPA
— SHAPE ATTRIBUTES OF THE DENSITY FUNCTION
— SKEWNESS, KURTOSIS
— FUNCTIONS ENDING WITH AN “A” SUFFIX
I am presuming that the reader is familiar with basic statistical functions
and/or has access to a basic statistics reference for learning more about 1 52 Chapter 9: Functions for Basic Statistics each function. “ AVERAGED” MEASURES OF CENTRAL TENDENCY 9.1 These set of functions perform some type of averaging to measure a
“mean” value. You may want to use the Trimmed Mean function to
estimate an average that excludes the extreme values of the data series.
The Harmonic Mean estimates the averages of the reciprocals of the
numbers in the series. The Geometric Mean is used to average rates of
change.
Samples will be available at http://www.vjbooks.net/excel/samples.htm. 9.1.A A VERAGE The function calculates the simple arithmetic average of all cells in the
chosen range.
Menu path to function: Go to the menu option INSERT/FUNCTION and
choose the formula “AVERAGE the function category STATISTICAL. Figure 113: AVERAGE function 1 53 Financial Analysis using Excel Data requirements: The X values can be input as references to one or more
ranges that may be non–adjacent. The second range can be referenced in
the first textbox “Number1” after placing a comma after the first range,
or it could be referenced in the second textbox “Number2.” If you use the
second textbox, then a third textbox “Number3” will automatically open.
(As you fill the last visible box, another box opens until the maximum
number of boxes — 30 — is reached.)
The function does not count invalid cell values when counting the number
of X values. The X values can take any real number value. 9.1.B T RIMMEAN (“TRIMMED MEAN”) This function is a variation of the average or mean. This function
calculates the average for a set of X values after removing “extreme
values” from the set. The excluded cells are chosen by the user based on
the extremity (from mean/median) of the values in the range.
TRIMMEAN calculates the mean taken by excluding a percentage of data
points from the top and bottom tails of a data set. The user decides on the
percentage of extreme values to drop. For symmetry, TRIMMEAN
excludes a set of values from the top and bottom of the data set before
moving on to the next exclusion.
Menu path to function: INSERT/FUNCTION/STATISTICAL/TRIMMEAN.
Data requirements: The X values can be input as references to one or more
ranges that may be non–adjacent. The function does not count invalid cell
values when counting the number of X values. The X values can take any
real number value. 1 54 Chapter 9: Functions for Basic Statistics Figure 114: TRIMMEAN (Trimmed Mean) In the dialog (shown above), Percent is the fractional number of data
points to exclude from the calculation. Percent must be greater than zero
and less than one. H ARMEAN (“HARMONIC MEAN”) 9.1.C The function calculates the harmonic mean of all cells in the chosen
range(s). The harmonic mean is the reciprocal of the arithmetic mean of
reciprocals. In the formula below, H is the harmonic mean, n the
sample/range size and the Y’s are individual data values.
Menu path to function: INSERT/FUNCTION/STATISTICAL/HARMEAN. Figure 115: HARMEAN (Harmonic Mean) Data requirements: The X values can take any real number value except
zero. 1 55 Financial Analysis using Excel Table 23: Comparing the results of the functions Average, Trimmed Mean
and Harmonic Mean Function s1 s2 x1 x2 x3 x4 Average/mean 7.32 7.23 1173.00 14.55 0.17 1158.45 Trimmed Mean 7.13 7.00 1173.00 14.42 0.02 1158.71 Harmonic Mean 3.84 3.18 120.17 13.52 0.01 #NUM! Harmonic mean for x4 is zero because one value of x4 is not positive. 9.1.D G EOMEAN (“GEOMETRIC MEAN”) This function is typically used to calculate average growth rate given
compound interest with series rates. In general, the function is good for
estimating average growth or interest rates.
Menu path to function: INSERT/ FUNCTION/ STATISTICAL/
GEOMEAN. Data requirements: All values should be positive. Figure 116: GEOMEAN (Geometric Mean) 1 56 Chapter 9: Functions for Basic Statistics 9.2 L OCATION MEASURES OF CENTRAL TENDENCY
( MODE, MEDIAN)
The Median and — less often — the Mode are also used for estimating the
central tendency of a series. The Median is much better in situations
where, either:
(a) A few extreme highs or lows are influencing the Mean (note that
the TRIMMEAN or Trimmed Mean function shown in the
previous section can reduce the chance of extreme values overinfluencing a Mean estimate), or
(b) The central tendency is required to obtain the midpoint of
observed values of the data series as in the “Median Voter”
models, which are used to know if the “Median Voter” threshold is
crossed in support of a point on the nominee’s agenda. (In a twoperson faceoff, any more than the Median vote will result in a
greater than 50% majority).
Samples will be available at http://www.vjbooks.net/excel/samples.htm. Figure 117: Some location indicators M ode M edian4 1 57 7 5 t h p ercentile
(or 3 rd
q uartile) Financial Analysis using Excel 9.2.A M EDIAN The Median is the number in the middle of a set of numbers. It is the 50th
percentile.
Menu path to function: INSERT/FUNCTION/STATISTICAL/MEDIAN.
Data requirements: Any array/range with real numbers. 9.2.B M ODE This function returns the most frequently occurring value in a range.
Menu path to function: INSERT/FUNCTION/STATISTICAL/MODE.
Data requirements: Any array/range with real numbers. The range has to
contain duplicate data values. 9.3 O THER LOCATION PARAMETERS (MAXIMUM,
P ERCENTILES, QUARTILES, OTHER)
Other useful location indicators for key points in a series are the
quartiles, percentiles, maximum value, minimum value, the Kth largest
value, and the rank.
Samples will be available at http://www.vjbooks.net/excel/samples.htm. 1 58 Chapter 9: Functions for Basic Statistics Q UARTILE 9.3.A This function calculates a quartile of a data series. QUARTILE (Data, Quartile) Choose the quartile you desire to obtain. The five quartiles are shown in
the next table. Table 24: Choosing the Quartile Quartile value of… Calculates the... 0 0.0….1% ile 1 First quartile (25th percentile) 2 Median value (50th percentile) 3 Third quartile (75th percentile) 4 Fourth quartile (99.9x%ile) Menu path to function: INSERT/FUNCTION/STATISTICAL/QUARTILE.
Data requirements: Any array/range with real numbers. Note: the data
series has to contain between 1 and 8,191 data points 9.3.B P ERCENTILE This function returns the Pth percentile of values in a data series. You can
use this function to establish a threshold of acceptance. For example, you
can prefer to examine candidates who score above the 95th percentile will
qualify for a scholarship. 1 59 Financial Analysis using Excel Menu path to function:
INSERT/FUNCTION/STATISTICAL/PERCENTILE. Figure 118: Estimating the 5th percentile. K is the percentile value in the range 0 to 1. Data requirements: Any array/range with real numbers. If the data array
is empty or contains more than 8,191 data points, PERCENTILE returns
the” #NUM!” error value. If K is not a multiple of (1/(n — 1)), then Excel
interpolates the value at the Kth percentile. Figure 1 19 : Estimating the 95th percentile 9.3.C M AXIMUM, MINIMUM AND “KTH LARGEST” MAX (“Maximum value”) MAX and MAXA: The functions calculate the largest value in a series. 1 60 Chapter 9: Functions for Basic Statistics Menu path to function: STATISTICAL/MAX , & STATISTICAL/MAXA.
Data Requirements: Any array/range with real numbers. In addition,
MAXA may include “True,” “False,” or numbers in text format MIN (“Minimum value”) MIN and MINA: The functions calculate the smallest value in a series
Menu path to function: STATISTICAL/MIN, & STATISTICAL/MINA
Data Requirements: Any array/range with real numbers. In addition,
MINA include “True,” “False,” or numbers in text format LARGE This function calculates the Kth largest value in a range. Figure 120: LARGE Menu path to function: STATISTICAL/LARGE
Data Requirements: Any real number. 1 61 Financial Analysis using Excel SMALL This function calculates the Kth smallest value in a range.
Menu path to function: STATISTICAL/SMALL
Data Requirements: Any real number. 9.3.D R ANK OR RELATIVE STANDING OF EACH CELL WITHIN THE
R ANGE OF A SERIES PERCENTRANK The PERCENTRANK function returns the rank of a value in a data set as
a percentage of the data set. The function can be used to evaluate the
relative standing of a value within a data set. For example, you can use
PERCENTRANK to evaluate the standing of a test score among all scores
for the test. Figure 121: Percentrank of the average/mean Menu path to function: INSERT/FUNCTION / STATISTICAL /
PERCENTRANK. 1 62 Chapter 9: Functions for Basic Statistics Data requirements: Any array/range with real numbers. RANK The function RANK calculates the relative rank of a value within a series
of numbers data. You can choose to obtain the ranks on the basis of
ascending or descending values. X is the data point whose rank is desired
within the range. Order sets the sorting direction— 1 for ascending
ranking, 0 or blank for descending ranking. Cells with the same value
cells are given the same rank.
Menu path to function: INSERT / FUNCTION / STATISTICAL / RANK.
Data requirements: Any array/range with real numbers. M EASURES OF DISPERSION (STANDARD DEVIATION 9.4 & V ARIANCE)
Table 25: Standard Deviation & Variance. Description
Function 1 63 Location within
INSERT /
FUNCTION Data Requirements Financial Analysis using Excel Description Location within
INSERT /
FUNCTION Data Requirements The functions STDEV
and VAR estimate the
sample standard
deviation and variance,
respectively. VAR is
the square of STDEV. STATISTICAL /
STDEVA
&
STATISTICAL /
VARA Any range with
sufficient number of
numeric data points.
Text and logical values
are excluded. Function mple dispersion:
DEV, VAR STDEVA, VARA These are variants of
the functions above but
with a wider range of
acceptable data types
as input data. STATISTICAL /
STDEVA
&
STATISTICAL / Text and logical values
such as TRUE and
FALSE are included in
the calculation. TRUE
is valued as 1; text or
FALSE is valued as 0. VARA
The less often used
population dispersion
functions are
ulation dispersio sometimes also used for
large sample sizes.
DEVP,
STDEVP assumes that
RP
its data are the entire
population. Typically,
you use the sample
formulae. For large
sample sizes, STDEV
and STDEVP return
approximately equal
values. VARP is
square of STDEVP
STDEVPA,
VARPA These are variants of
the functions above but
with a wider range of
acceptable data types
as input data STATISTICAL /
STDEVA
& A large number of
observations.
Text and logical values
are excluded. STATISTICAL /
VARA STATISTICAL /
STDEVA
&
STATISTICAL /
VARA Text and logical values
such as TRUE and
FALSE are included in
the calculation. TRUE
is valued as 1; text or
FALSE is valued as 0.
Text and logical values
such as TRUE and
FALSE are included in
the calculation. TRUE 1 64 Chapter 9: Functions for Basic Statistics Description Location within
INSERT /
FUNCTION Function Data Requirements is valued as 1; text or
FALSE is valued as 0.
Figure 122: Dialog for STDEV Figure 123: Dialog for STDEVA. Note that the functions with the “A” suffix request “Values”
as input while the equivalent non–suffixed functions request “Numbers” 9.5 S HAPE ATTRIBUTES OF THE DENSITY FUNCTION
( SKEWNESS, KURTOSIS) 9.5.A S KEWNESS Skewness measures asymmetry around the mean. The parameter is best
interpreted as relative to the Normal Density Function (whose Skewness
equals zero). The interpretation of the Skewness for a series (relative to
the Normal Density Function) is:
— Skewness > 0
— Skewness < 0 1 65 asymmetric tail with more values above the mean.
asymmetric tail with more values below the mean. Financial Analysis using Excel The next three figures shown Density Functions that have a Skewness >
0, = 0, and < 0, respectively, for three variables Y1, Y2 and Y3. (Y2 is
distributed Normally). Figure 124: Distribution of series Y1.
Skewness > 0 Figure 125: Distribution of series Y2.
Skewness = 0. Figure 126: Distribution of series Y3
Skewness < 0 Samples will be available at http://www.vjbooks.net/excel/samples.htm. 1 66 Chapter 9: Functions for Basic Statistics Figure 127: SKEW (Skewness) Menu path to function: INSERT / FUNCTION / STATISTICAL / SKEW 9.5.B K URTOSIS Compared with the Normal Density Function (which has a Kurtosis of
zero), the interpretation of the kurtosis for a series is:
— Kurtosis > 0 peaked relative to the Normal Density Function — Kurtosis < 0 flat relative to the Normal Density Function The next figure shows three Density Functions. The Density Functions
lie around the same Mean and Median, but note the difference in the
relative flatness of the Density Functions:
Distribution of series X1 is the flattest with a Kurtosis < 0, that of X2 is
less flat with a Kurtosis = 0 (a Normal Density Function) and that of
series X3 is the least flat with a Kurtosis > 0. 1 67 Financial Analysis using Excel Figure 128: Example of Density Functions with different Skewness Samples will be available at http://www.vjbooks.net/excel/samples.htm.
Menu path to function: INSERT / FUNCTION / STATISTICAL / KURT 9.6 F UNCTIONS ENDING WITH AN “A” SUFFIX
These functions calculates the same statistic as their “twin” formula (the
one without the prefix “A”) but include a wider range of valid cell values
in the relevant formula. The “A” –suffixed functions include the following
types of cell values:
— Logical (and not numeric) like “True” and “False” (valued as 1 and 0,
respectively),
— Blank cells (valued as 0), and
— Text (valued as 0).
A text string or a blank cell is valued as zero. The next table lists these
twin functions: 1 68 Chapter 9: Functions for Basic Statistics Table 26: Functions ending with the “A” suffix. The non–
prefixed
function Comment AVERAGE AVERAGEA Simple average/mean COUNT COUNTA Count of valid cells. The prefixed
function is very useful in counting. STDEV STDEVA Standard deviation STDEVP STDEVPA Standard deviation from a population or
a very large sample (relative to
population) VAR VARA Variance VARP VARPA Variance from population (and not
sample) data, or from a very large sample
(relative to population) MIN MINA Minimum value MAX 1 69 The “A” prefixed
“twin” formula MAXA Maximum value Financial Analysis using Excel 1 70 P age for Notes Financial Analysis using Excel CHAPTER 10
O THER MATHEMATICS & STATISTICS FUNCTIONS This chapter briefly displays some other functions available in Excel. The
topics in this chapter are:
— COUNTING AND SUMMING
— COUNT, COUNTA
— COUNTBLANK
— COMPARING COUNT, COUNTA AND COUNTBLANK
— SUM
— PRODUCT
— SUMPRODUCT
— THE “IF “COUNTING AND SUMMING FUNCTIONS
— SUMIF
— COUNTIF
— TRANSFORMATIONS (LIKE LOG, EXPONENTIAL, ABSOLUTE,
ETC)
— STANDARDIZING A SERIES THAT FOLLOWS A NORMAL
DENSITY FUNCTION
— DEVIATIONS FROM THE MEAN
— CROSS SERIES RELATIONS
— COVARIANCE AND CORRELATION FUNCTIONS
— SUM OF THE SUM OF THE SQUARES OF TWO VARIABLES 1 72 Chapter 10: Other Mathematics & Statistics Functions — SUM OF THE SQUARES OF DIFFERENCES ACROSS TWO
VARIABLES
— SUM OF THE DIFFERENCE OF THE SQUARES OF TWO
VARIABLES C OUNTING AND SUMMING 10.1 COUNT function This function counts the number of valid cells in a range. Cells are valid
only if there value is numeric or a date.
Menu path to function: INSERT / FUNCTION / STATISTICAL
/ COUNT.
Data requirements: Numbers and dates are included in the count. Not
counted cells include those that contain error values, text, blank cells, and
logical values (like TRUE and FALSE). The X values can be input as
references to one or more ranges that may be non–adjacent.
The second range can be referenced in the first textbox “Value1” after
placing a comma after the first range, or it could be referenced in the
second textbox “Value2.”
If you use the second textbox, then a third textbox “Value3” will
automatically open. (As you fill the last visible box, another box opens
until the maximum number of boxes — 30 — is reached.) 1 73 Financial Analysis using Excel Table 27: Sample data for the “Count” functions.
The example is in the sample file “Count.xls.” A B C D Y Date Respondent is employed .51 24.34 24— Sep— 2000 TRUE 20.07 24.34 25— Sep— 2000 FALSE VALUE! 24.34 26— Sep— 2000 #VALUE! 15.28 24.34 27— Sep— 2000 FALSE DIV/0! #VALUE! 28— Sep— 2000 TRUE 11.63 24.34 #N/A! 30— Sep— 2000 .86 29— Sep— 2000 TRUE 1— Oct— 2000 FALSE REF! 22.00 .74 22.00 NAME? 22.00 3— Oct— 2000 .13 22.00 4— Oct— 2000 TRUE N/A! 21.58 5— Oct— 2000 TRUE TRUE Figure 129: COUNT 1 74 Chapter 10: Other Mathematics & Statistics Functions COUNTA function also counts cells with logical or text values This function counts the number of valid cells in a range. Valid values
include cells with numeric, date, text, logical, or error value. COUNTA
only excludes empty cells, but text and logical values are only counted if
you type them directly into the list of arguments are counted. If an
argument is a data array or range reference, only numbers in that data
array or range reference. Figure 130: The function COUNTA is a variant of the COUNT function. The example is in the
sample file “Count.xls.” Menu path to function: INSERT / FUNCTION / STATISTICAL /
COUNTA. Data requirements: Unlike the COUNT function, COUNTA will include
the label row in the count. (So, if you have one label in the referenced
range, you may want to use “= COUNTA (A:A) — 1”.) The X values can be
input as references to one or more ranges that may be non–adjacent. The
second range can be referenced in the first textbox “Value1” after placing
a comma after the first range, or it could be referenced in the second textbox “Value2.” If you use the second textbox, then a third textbox
“Value3” will automatically open. (As you fill the last visible box, another
box opens until the maximum number of boxes — 30 — is reached.) The
function does not count invalid cell values when counting the number of X
values. 1 75 Financial Analysis using Excel COUNTBLANK function counts the number of empty cells in the range reference This function counts the number of blank cells in a range.
Menu path to function: INSERT /FUNCTION
/INFORMATION/COUNTBLANK. Figure 131: COUNTBLANK. The example is in the sample file “Count.xls.” SUM function This function sums the values in the data array. SUM = X1 + X2 +…. +Xn Menu path to function: INSERT / FUNCTION / MATH / SUM. Figure 132: SUM Data requirements: This function does not include blank cells or cells with
values that are of the following formats: text, and logical values (that is,
TRUE and FALSE.) 1 76 Chapter 10: Other Mathematics & Statistics Functions PRODUCT function This function multiplies all the values referenced. PRODUCT = X1 * X2 *….* Xn Figure 133: PRODUCT (multiplying all the values in a range) Menu path to function: INSERT / FUNCTION / MATH / PRODUCT. SUMPRODUCT function This function multiplies corresponding components in two or more data
arrays/ranges, and then sums the results of these multiplications. The
data arrays/ranges must have the same number of data points.
Menu path to function: INSERT /FUNCTION /MATH /SUMPRODUCT Figure 134: SUMPRODUCT (multiplying individual data points across data series and then
adding up the results of all these multiplications). Data Array1, data Array2, data Array3 ... are 2 to 30 data arrays/ranges
whose components you desire to multiply and then add. The minimum
number of arrays is two. The data arrays must have the same number of
data points. Nonnumeric cell values are assigned the value of zero. 1 77 Financial Analysis using Excel The X values can be input as references to two or more ranges that may
be non–adjacent. The second range should be referenced in the second
textbox “Array2.” If you use the third textbox, then a fourth textbox
“Array4” will automatically open. (As you fill the last visible box, another
box opens until the maximum number of boxes — 30 — is reached.)
Example
The following formula multiplies all the components of the two data
arrays on the preceding worksheet and then adds the products— that is,
3*2 + 4*7 + 8*6 + 6*7 + 1*5 + 9*3.
Note:
Samples will be available at http://www.vjbooks.net/excel/samples.htm. Figure 135: Columns A and B make up one data series while columns D and E make up the
other data series 10.2 T HE “IF” COUNTING AND SUMMING FUNCTIONS:
S TATISTICAL FUNCTIONS WITH LOGICAL
CONDITIONS
I display two “ifthen” twostep functions in this section. The functions
first evaluate a criterion. If a cell in the referenced range satisfies the
criteria then the second part of the function includes this cell. 1 78 Chapter 10: Other Mathematics & Statistics Functions SUMIF function This function adds the values in a range if the cell with the value satisfies
a userdefined criterion.
• In the box Range, enter a reference to the range of cells you want
evaluated. Figure 136: SUMIF (summing only the cells whose value satisfies one “if” condition) • In the box Criteria, enter the condition (a number, expression, or
text) that defines which cells values will be summed. For
example, Criteria can be expressed as 32, “32,” “>32”. • In the box Sum_range, you may reference the actual cells to sum.
The cells in sum range are summed only if their corresponding
cells in the entire Range match the criteria. If sum range is
omitted, all the “criterionsatisfying” cells in the Range are
summed. Menu path to function: INSERT / FUNCTION / MATH / SUMIF. The
Criteria should be relevant to the type of data/text in the queried range. COUNTIF function This function counts the number of cells in a range that satisfy a userdefined criterion. 1 79 Financial Analysis using Excel The dialog for “COUNTIF“ requires two inputs from the user. The
“Range” is similar to the functions shown previously. The “Criteria” is a
logical condition set by you. Figure 137: COUNTIF (counting only the cells whose value satisfies one “if” condition) • In the box Range, enter a reference to the range of cells you seek to
evaluate. • In the box Criteria, enter the condition (a number, expression, or
text) that defines which cells will be counted. For example,
Criteria can be expressed as 32, “32,” “>32,” “tea.” Menu path to function: INSERT /FUNCTION /STATISTICAL /COUNTIF.
Data requirements: The range can take any values. The Criteria should
be relevant to the type of data/text in the queried range. Example
Choose the range “D:D” and the condition “>1,000,000”. The function is
“Count the number of cases in the range D:D, but only if the value of the
cell is greater than 1 million.”
For a pictorial reproduction of this, see the next figure. 1 80 Chapter 10: Other Mathematics & Statistics Functions Figure 138: Entering the data input and logical criterion Execute the dialog by clicking on the button OK. The formula is written
onto the cell. The next figure illustrates this. Depress the ENTER key. Figure 139: The function as written into the cell T RANSFORMATIONS (LOG, EXPONENTIAL, 10.3 A BSOLUTE, SUM, ETC)
Table 28: Common transformation functions Function
Sign Description This function outputs the
sign of a number.
MATH /SIGN
Returns 1 if the number
is positive, zero (0) if the
number is 0, and –1 if
the number is negative.
Useful for red–flagging
data, or using in
functions like IF,
COUNTIF, SUMIF and
CHOOSE. 1 81 Location within
INSERT
/FUNCTION Data Requirements Any real value. Financial Analysis using Excel Function Description Data Requirements MATH /ABS Absolute
number Location within
INSERT
/FUNCTION One real number. MATH/SQRT One positive real
number. ABS =  X  Square root The square root of a
number. Y = X1/2 One positive real
number. Log natural
LN (X) MATH /LN This function calculates the
natural logarithm of a
number. Natural
logarithms are based on
the constant e (2.718).
LN (85) = 4.454347.
This mean: “If you raise the
base e to the power of 4.45
you will get 85.
LN (85)
= 4.45.
Conversely,
exp (4.45) = e^ (4.45) =
2.718^ (4.45) = 85. Exponential
This function calculates the MATH /EXP
exponential to a number. One positive real
number. 1 82 Chapter 10: Other Mathematics & Statistics Functions Function Description Location within
INSERT
/FUNCTION
MATH /LOG10 Log to the
base 10 Data Requirements One positive real
number. LOG10 (X)
This function calculates the
base 10 logarithm of a
number.
LOG10 (85) = 1.934
because the base of 10
needs to be raised 1.934
times to get 85:
101.934 = 85
LOG10 (10) = 1 because
101 = 10
LOG10 (1000) = 3 because
103 = 1000 Log to a user
defined base This function calculates the MATH/LOG.
logarithm of a number to
the base you specify. The
default base is 10. For
natural log use base e =
2.718. LOG (X, base)
LOG (100) = 2
base 10.
(Since 102 = 100).
LOG (27, 3) = 3
(Since 33 = 27). base 3. LOG (86, 2.7182818) = 4.45
same as natural log.
Because— (exp (4.45) = 85). 1 83 A positive real
number X and the
(optional) base of
the logarithm.
If base is omitted,
it is assumed = 10. Financial Analysis using Excel Standardizing a series that follows a Normal Density Function Converts a value in a series X to its equivalent standard normal
transformation. STANDARDIZE (x, AVERAGE (X), STDEV (X)) where X is all the numbers
in the X data series. Menu path to function:
INSERT/FUNCTION/STATISTICAL/STANDARDIZE.
Data requirement: The function requires three input numbers: x, mean of
the X series, and the standard deviation of the X series. The mean and
standard deviation can be written as a “function within a function.” 10.4 D EVIATIONS FROM THE MEAN
The formulas in this and the next section provide estimates of functions
used in formulas for parameters obtained in advanced analysis like
ANOVA, Correlation, Regression, etc. DEVSQ This function calculates the sum of squares of deviations of data points
from their sample mean 1 84 Chapter 10: Other Mathematics & Statistics Functions Σ ((x — mean (x))2 Menu path to function: MATH/DEVSQ
Data Requirements: A range(s) of real numbers, inclusive of zero. Figure 140: Summation of the squares of the “differences of individual points from the mean of
the series” AVEDEV This function calculates the average of the absolute deviations of data
points from their mean. AVEDEV is a measure of the variability in a data
set. Menu path to function: STATISTICAL/AVEDEV
Menu path to function: A range(s) of real numbers, inclusive of zero. 1 85 Financial Analysis using Excel C ROSS SERIES RELATIONS 10.5 C OVARIANCE AND CORRELATION FUNCTIONS 10.5.A The functions are CORREL, COVAR, PEARSON, & RSQ. I recommend
using the Analysis ToolPak AddIn — refer to Volume 5: Statistical
Analysis using Excel. S UM OF SQUARES 10.5.B SUMX2PY2 function evaluates the “Sum of the sum of the squares of each
case in two variables”
This function estimates the summation of the squares of individual points
in two series. Σ (x2 + y2) Figure 141: Summation of the squares of individual points in two series. Samples will be
available at http://www.vjbooks.net/excel/samples.htm. Menu path to function: INSERT/FUNCTION/MATH/SUMX2PY2.
Data requirements: This function needs two data series. 1 86 Chapter 10: Other Mathematics & Statistics Functions SUMXMY2 function This function estimates Sum of the squares of differences of each case in
two across two variables. Σ ((x — y)2) Figure 142: Summation of the squares of the “differences in individual points in two series.”
Samples will be available at http://www.vjbooks.net/excel/samples.htm. Menu path to function: INSERT/FUNCTION/MATH/SUMXMY2. Data
requirements: This function needs two data series. SUMX2MY2 function This function estimates the Sum of the difference of the squares of each
case in two variables. Σ (x2 — y2) Menu path to function: INSERT/FUNCTION/MATH/SUMX2MY2.
Data requirements: This function needs two data series. 1 87 Financial Analysis using Excel 1 88 P age for Notes Financial Analysis using Excel CHAPTER 11
L OGICAL & INFORMATION
FUNCTIONS This chapter teaches the following topics:
— NEGATIVE NESTING (THE NOT FUNCTION)
— FUNCTIONS THAT OUTPUT TRUE/FALSE AFTER
EVALUATING IF ALL/ONE/NONE OF THE LOGICAL
EXPRESSIONS ARE TRUE
— AND, OR, NOT(AND), NOT(OR)
— INFORMATION FUNCTIONS ON TYPE OF DATA IN CELL (IS
FUNCTIONS)
— ISBLANK, NOT(ISBLANK), ISLOGICAL, NOT(ISLOGICAL),
ISNUMBER, NOT(ISNUMBER), ISTEXT, ISNONTEXT,
NOT(ISTEXT), ISREF, NOT(ISREF)
— TYPE FUNCTION PROVIDES INFORMATION ON THE DATA
TYPE OF THE VALUE IN A CELL
— TESTING IF ODD OR EVEN NUMBER
— ISODD, — ISEVEN
— INFORMATION ON ERROR TYPE IN A CELL (#N/A, #VALUE!,
#REF!, #DIV/0!, #NUM!, #NAME?, #NULL!)
— ISERR, NOT(ISERR), ISNA, NOT(ISNA), ISERROR,
NOT(ISERROR),
— ERROR.TYPE FUNCTION PROVIDES INFORMATION ON THE 1 90 Chapter 11: Logical & Information Functions ERROR TYPE — IF ANY  IN A CELL 11.1 N EGATIVE NESTING (THE NOT FUNCTION)
The NOT function switches a TRUE to FALSE and vice versa.
NOT(FALSE) = TRUE
NOT(10+1=11) gives the result FALSE, because the expression is TRUE.
Examples are in the worksheet “Logical and, or, not” in the sample file
“Logical and Information.xls.” Additional samples will be available at
http://www.vjbooks.net/excel/samples.htm.
As you will see in the next sections, the NOT function can be extremely
powerful when combined with other logical/information functions. In
effect, the combination is a new and unique logical function.
The function is useful inside IF and other nested logical functions. Refer
to chapter 12. 1 91 Financial Analysis using Excel F UNCTIONS THAT OUTPUT TRUE/FALSE AFTER 11.2 E VALUATING IF ALL/ONE/NONE OF THE LOGICAL
EXPRESSIONS ARE TRUE (THE FUNCTIONS— AND,
OR) 11.2.A A ND FUNCTION The function tests for “ALL EXPRESSIONS ARE TRUE“
The function can have many logical expressions/arguments, each
separated by a comma. If –and only if  all the logical
expressions/arguments are true, the function result is TRUE.
If even one of the logical expressions/arguments is not true, the function
result is FALSE.
Location wthin INSERT / FUNCTION: LOGICAL/AND
Data Requirements: One or more logical expressions. A comma separates
each expression. AND(expression 1, expression 2, ….., expression k) Examples:
• AND(TRUE, FALSE) = FALSE
(because one of the logical expressions is not equal to
TRUE)
• AND(10+1=11, 10*1=1, 102=8, 10<100) = TRUE 1 92 Chapter 11: Logical & Information Functions (because all four expressions are TRUE)
but,
AND(10+1=11, 10*1=10, 102=12, 10<100) = FALSE
(because the third expression is FALSE while the other
expressions are true) 11.2.B O R FUNCTION The function tests for “EVEN IF ONE EXPRESSION IS TRUE”
The function can have many logical expressions/arguments, each
separated by a comma. If even one of the logical expressions/arguments
is TRUE, then the function result is TRUE.
If –and only if  all of the logical expressions/arguments are FALSE, the
function result is FALSE.
Location wthin INSERT / FUNCTION: LOGICAL/OR
Data Requirements: One or more logical expressions. A comma separates
each expression. OR(expression 1, expression 2, ….., expression k) Examples:
• OR(TRUE, FALSE) = TRUE
(because one of the logical expressions is TRUE) 1 93 Financial Analysis using Excel • OR(10+1=11, 10*1=11, 102=8, 10<100) = TRUE (because all four expressions are TRUE)
and,
OR(10+1=11, 10*1=10, 102=12, 10<100) = TRUE
(because at least one expression is TRUE) 11.2.C N OT(AND) FUNCTION The function tests for “EVEN IF ONE IS TRUE“
It provides the same test for FALSE expressions as the function AND does
for TRUE expressions. If even one of the logical expressions/arguments
is FALSE, then the function result is TRUE.
If –and only if  all of the logical expressions/arguments are TRUE the
function result is FALSE.
Location wthin INSERT / FUNCTION: LOGICAL/AND, &
LOGICAL/NOT
Data Requirements: One or more logical expressions. A comma separates
each expression. NOT (AND (expression 1, ….., expression k)) Examples:
• NOT (AND(TRUE, FALSE)) = TRUE 1 94 Chapter 11: Logical & Information Functions (because one of the expressions is FALSE)
• NOT (AND(10+1=11, 10*1=10, 102=8, 10<100)) = FALSE
(because none of the expressions are FALSE. They are all
TRUE)
and,
NOT (AND(10+1=11, 10*1=10, 102=12, 10<100)) = TRUE
(because at least one expression –the third expression in this
example is FALSE)
but,
NOT (AND(10+1=1, 10*1=1, 102=1, 10<1))= TRUE
(because at least one expression is FALSE) 11.2.D N OT(OR) FUNCTION The function tests for “ALL FALSE“
It provides the same test for FALSE expressions as the function AND does
for TRUE expressions. If –and only if  all the logical
expressions/arguments are FALSE, then the function result is TRUE.
If even one of the logical expressions/arguments is TRUE, the function
result is FALSE.
Location wthin INSERT / FUNCTION: LOGICAL/OR, & LOGICAL/NOT 1 95 Financial Analysis using Excel Data Requirements: One or more logical expressions. A comma separates
each expression. NOT (OR(expression 1, ….., expression k)) Examples:
• NOT (OR(TRUE, FALSE)) = FALSE
(because one of the expressions is TRUE)
• NOT (OR(10+1=11, 10*1=10, 102=8, 10<100)) = FALSE
(because all four expressions are TRUE)
and,
NOT (OR(10+1=11, 10*1=10, 102=12, 10<100)) = FALSE
(because at least one expression is TRUE)
• but,
• NOT (OR(10+1=1, 10*1=1, 102=1, 10<1))= TRUE
(because all the expressions are FALSE)
The functions are useful inside IF and other nested logical functions.
Refer to chapter 12. Table 29: Examples of the logical functions AND, OR, and NOT. Examples are in the
worksheet “Logical and, or, not” in the sample file “Logical and Information.xls.” Additional
samples will be available at http://www.vjbooks.net/excel/samples.htm. Function Result AND
AND(TRUE, FALSE) FALSE 1 96 Chapter 11: Logical & Information Functions Function
AND(10+1=11, 10*1=10, 102=8, 10<100)
AND(10+1=11, 10*1=10, 102=12, 10<100) Result
TRUE
FALSE OR
OR(TRUE, FALSE)
OR(10+1=11, 10*1=10, 102=12, 10<100) TRUE
TRUE NOT (AND)
NOT (AND(TRUE, FALSE))
NOT (AND(10+1=11, 10*1=10, 102=8, 10<100))
NOT (AND(10+1=11, 10*1=10, 102=12, 10<100))
NOT (AND(10+1=1, 10*1=1, 102=1, 10<1)) TRUE
FALSE
TRUE
TRUE NOT (OR)
NOT (OR(TRUE, FALSE))
NOT (OR(10+1=11, 10*1=10, 102=8, 10<100))
NOT (OR(10+1=11, 10*1=10, 102=12, 10<100))
NOT (OR(10+1=1, 10*1=1, 102=1, 10<1)) 11.3 FALSE
FALSE
FALSE
TRUE I NFORMATION FUNCTIONS ON TYPE OF DATA IN
C ELL (IS FUNCTIONS)
The following “IS” functions are used to test if a value or the result of a
function in a referenced cell conforms (or, does not conform, if one adds
the NOT function to the IS function) to a certain data type. 1 97 Financial Analysis using Excel The functions are used as, for example,
ISBLANK(Reference to a Cell),
or
NOT(ISBLANK(Reference to a Cell)) Table 3 0 : The “IS” information functions. Examples are in the worksheet ‘“IS” information
functions’ in the sample file “Logical and Information.xls.” The formula result = Location within
TRUE if...
INSERT/FUNCTION Data
Requirements ISBLANK The referenced cell is INFORMATION/ISBLANK
empty. One referenced
cell. NOT(ISBLANK) The referenced cell is INFORMATION/ISBLANK
not empty
& One referenced
cell. Function LOGICAL/NOT ISLOGICAL The referenced cell’s INFORMATION/ISLOGICAL
value is TRUE or
FALSE. One referenced
cell. NOT(ISLOGICAL) The referenced cell’s INFORMATION/ISLOGICAL
value is neither
&
TRUE nor FALSE.
LOGICAL/NOT One referenced
cell. ISNUMBER The referenced cell’s INFORMATION/ISNUMBER
value is a number. One referenced
cell. NOT(ISNUMBER) The referenced cell’s INFORMATION/ISNUMBER
value is not a
&
number.
LOGICAL/NOT One referenced
cell. ISTEXT The referenced cell’s INFORMATION/ISTEXT
value is a text string. One referenced
cell. ISNONTEXT The referenced cell’s INFORMATION/ISNONTEXT
value is not a text
string or is blank. One referenced
cell. 1 98 Chapter 11: Logical & Information Functions The formula result = Location within
TRUE if...
INSERT/FUNCTION Function NOT(ISTEXT) Data
Requirements The referenced cell’s INFORMATION/ISTEXT
value is not a text
&
string.
LOGICAL/NOT One referenced
cell. INFORMATION/ISREF One referenced
cell. The referenced cell’s INFORMATION/ISREF
value is not a
&
reference to a range.
LOGICAL/NOT One referenced
cell. ISREF
The referenced cell’s
value is a reference
to a range. NOT(ISREF) The functions are useful inside IF and other nested logical functions.
Refer to chapter 12. 11.3.A T YPE FUNCTION PROVIDES INFORMATION ON THE DATA TYPE
O F THE VALUE IN A CELL The TYPE function may be used in nested logical functions like AND, OR,
NOT, IF and CHOOSE. The function TYPE gives as result the numbers
shown in the right column of the table below.
The function is: TYPE(Reference to a Cell) Table 3 1 : Mapping of the output of the function TYPE and specific data types. Examples are
in the worksheet ‘“IS” information functions’ in the sample file “Logical and Information.xls.” If the referenced cell’s value is 1 99 The result of the
TYPE function is: Financial Analysis using Excel If the referenced cell’s value is The result of the
TYPE function is: Number 1 Text 2 Logical value 4 Error value 16 Array 64 The function is useful inside IF, CHOOSE and other nested or logical
functions. Refer to chapter chapter 12 starting on page 202. Table 32: Examples of the IS functions. Examples are in the worksheet ‘“IS” information
functions’ in the sample file “Logical and Information.xls.” Test Values 10 TEST 235 TRIAL 1 ISBLANK FALSE FALSE TRUE FALSE FALSE FALSE FALSE NOT(ISBLANK) TRUE TRUE FALSE TRUE TRUE TRUE TRUE ISLOGICAL FALSE FALSE FALSE FALSE TRUE FALSE FALSE NOT(ISLOGICAL) TRUE TRUE TRUE TRUE FALSE TRUE TRUE ISNUMBER TRUE FALSE FALSE FALSE FALSE TRUE FALSE NOT(ISNUMBER) FALSE TRUE TRUE TRUE TRUE FALSE TRUE ISTEXT FALSE TRUE FALSE FALSE FALSE FALSE TRUE ISNONTEXT TRUE FALSE TRUE TRUE TRUE TRUE FALSE NOT(ISTEXT) TRUE FALSE TRUE TRUE TRUE TRUE FALSE 1 2 1 16 4 1 2 TYPE #VALUE! TRUE 2 00 Chapter 11: Logical & Information Functions T ESTING IF ODD OR EVEN NUMBER 11.4 ISODD function Outputs TRUE if the referenced value is an Odd number.
Location wthin INSERT / FUNCTION: INFORMATION/ISODD
Data Requirements: One Integer. (Nonintegers are truncated by Excel
Examples:
• ISODD(1) = TRUE • ISODD(1) = TRUE • ISODD(2) = FALSE • ISODD(2.5) = FALSE, because the number “2.5” is truncated to
2. ISEVEN function Outputs TRUE if the referenced value is an Even number.
Location wthin INSERT / FUNCTION: INFORMATION/ISEVEN
Data Requirements: One Integer. (Nonintegers are truncated by Excel)
Examples:
•
• ISEVEN(1) = FALSE • 2 01 ISEVEN(1) = FALSE ISEVEN(2) = TRUE Financial Analysis using Excel • ISEVEN(2.5) = TRUE, because the number “2.5” is truncated to
2. I NFORMATION ON ERROR TYPE IN A CELL (#N/A, 11.5 # VALUE!, #REF!, #DIV/0!, #NUM!, #NAME?, #NULL!)
The functions are used as, for example,
ISERR(Reference to a Cell) or NOT(ISERR(Reference to a Cell)) Table 33: The “IS Error” information functions. Examples are in the worksheet “Errors’ in the
sample file “Logical and Information.xls.” Function The formula result=TRUE if... Location within
INSERT/FUNCTION Data
Requirements ISERR The referenced cell’s value is INFORMATION/ISERR
any error value except #N/A. One
referenced
cell. These error values are—
#VALUE!, #REF!, #DIV/0!,
#NUM!, #NAME?, #NULL!.
NOT(ISERR) The referenced cell’s value is INFORMATION/ISERR
not any of the following error
&
values:
#VALUE!, #REF!, #DIV/0!,
#NUM!, #NAME?, #NULL!. LOGICAL/NOT One
referenced
cell. ISNA The referenced cell’s value is INFORMATION/ISNA
the #N/A (not available) error
value. One
referenced
cell. NOT(ISNA) The referenced cell’s value is INFORMATION/ISNA
the not equal to the #N/A
(not available) error value. & One
referenced
cell. 2 02 Chapter 11: Logical & Information Functions Function The formula result=TRUE if... Location within
INSERT/FUNCTION Data
Requirements LOGICAL/NOT ISERROR The referenced cell’s value is INFORMATION/ISERROR One
any error value.
referenced
cell.
The error values are— #N/A,
#VALUE!, #REF!, #DIV/0!,
#NUM!, #NAME?, #NULL!. NOT(ISERROR) The referenced cell’s value is INFORMATION/ISERROR One
not any error value.
referenced
&
cell.
The error values are— #N/A,
#VALUE!, #REF!, #DIV/0!, LOGICAL/NOT
#NUM!, #NAME?, #NULL!.
N Converts the information in INFORMATION/N
the referenced cell into its
numeric equivalent. Excel
evaluates the logical values
TRUE & FALSE as 1 and 0,
respectively. A date is
converted into a serial
number. One
referenced
cell (A serial number can
represent each date. On
reformatting (or using one of
the “Serial number to date”
functions), the serial number
will show as dates. Excel
evaluates a Text string as
zero. Errors retain their error
value. 11.5.A E RROR.TYPE FUNCTION PROVIDES INFORMATION ON THE
E RROR TYPE — IF ANY  IN A CELL The function is used as, for example: 2 03 Financial Analysis using Excel ERROR.TYPE (Reference to a Cell)
This function is often used in an IF or CHOOSE function. Table 34: Mapping of the output of the function ERROR.TYPE and specific Error values.
Examples are in the worksheet “Errors’ in the sample file “Logical and Information.xls.” If the value is… Then the ERROR.TYPE
result is: NULL! 1 DIV/0! 2 VALUE! 3 REF! 4 NAME? 5 NUM! 6 N/A 7 No error #N/A The function is useful inside IF, CHOOSE and other nested OR logical
functions. Refer to chapter 12. Note: you can color code cells whose
values have error terms using “Conditional Formatting.” This topic is
taught in book 3. Table 35: Examples of the IS (ERROR) functions Formula or cell value ISNA VALUE! FALSE TRUE TRUE FALSE 3 NAME? FALSE TRUE TRUE FALSE 5 REF! FALSE TRUE TRUE FALSE 4 NOT(ISNA) ISERROR NOT(ISERROR) ERROR.TYPE 2 04 Chapter 11: Logical & Information Functions Formula or cell value ISNA NOT(ISNA) ISERROR NOT(ISERROR) N/A TRUE FALSE 35 ERROR.TYPE TRUE TRUE 7 FALSE TRUE FALSE FALSE #N/A NULL! FALSE TRUE TRUE TRUE 1 FALSE FALSE TRUE FALSE TRUE #N/A NUM! FALSE TRUE FALSE TRUE #N/A FALSE TRUE FALSE FALSE #N/A FALSE TRUE TRUE TRUE 2 DIV/0 L OOKUP OR “LOCATION” FUNCTIONS 11.6 All the functions mentioned in this section are accessible through
INSERT/FUNCTION/LOOKUP. The functions: COLUMN/ROW This function evaluates the column/row number of a reference.
• COLUMN(F181) = 6 • ROW(F181) = 181 The functions: COLUMNS/ROWS This function evaluates the number of columns/rows in a reference. 2 05 Financial Analysis using Excel • COLUMNS(B2:F181) = 5 • ROWS(B2:F181) = 180 The functions: INDEX, MATCH, OFFSET, HYPERLINK, ADDRESS, TRANSPOSE,
AREAS, INDIRECT Discussion of these functions is beyond the scope of this book. The
functions are useful while developing Excel using Visual Basic for
Applications (VBA). 2 06 P age for Notes Financial Analysis using Excel CHAPTER 12
“ SMART” NESTED FUNCTIONS
THAT RESPOND TO FORMULA
RESULT The topics discussed in this chapter are:
— IF FUNCTION
— CHOOSE FUNCTION
— TOOLS THAT ASSIST WITH NESTING
— NEW TOOLS IN EXCEL XP I F FUNCTION 12.1 The function “IF” is probably the most useful Excel function. A clever use
of the IF function makes available an amazing level of smartness in
formulae. The function provides almost codinglike binary functionality
— you can nest up to seven IF functions. Therefore, you can write in 21
possible actions as long as the actions can be set up as TRUE/FALSE
conditions. The innermost “IF” is evaluated first, and the outermost the
last.
IF(logical expression that may evaluate to TRUE or FALSE, x1 or
value/action if the logical expression is TRUE, x2 or value/action if the 2 08 Chapter 12: “Smart” nested functions that Respond to Formula Result logical expression is TRUE)
Stage 1:
Excel evaluates the logical expression first. The result is TRUE or
FALSE.
Stage 2:
If the first stage result is TRUE, then Excel evaluates x1. If the first
stage result is FALSE, then Excel evaluates x2. An option may be a
number, string, formula or function, or cell reference
The IF function often nests and uses many other information or IS and
logical/smart functions. Many samples will be available at
http://www.vjbooks.net/excel/samples.htm. 12.2 C HOOSE FUNCTION
CHOOSE runs one of several optional userdefined/chosen
values/references/formulas based on an index number which that may
take the values 1 to 29. The index number is from a userset cell
reference. CHOOSE can be used as a “superIF if the conditionality
inherent in the analysis may have more than a simple YES/NO result.
CHOOSE(index, option 1, option 2,..., up to a maximum of option 29)
The index is a number 1 between 29, or a formula or reference to a cell
evaluating to an integer between 1 and 29. (Excel truncates down
decimalbearing numbers.) If the value of the index = 1, then option 1 (a
value, cell reference, or function) will be evaluated. If the index equals 2, 2 09 Financial Analysis using Excel then option 2 will be evaluated ...and so on until a maximum of 29
options. Stage 1:
The function first evaluates the index. The cell referenced as the index
may contain a number, a reference to another cell or a formula. Assume
that the result is index = x, where x is between 1 and 29. Stage 2:
In the second stage, the function chooses “option x” where x is the
evaluated value of the index. An option may be a number, string,
formula, or function, or cell/range reference. AVERAGE(CHOOSE(7, A1:A100, A101:A200, A201:A300, A301:A400,
D1:D100, D101:D200, D201:D300, D301:D400)) = AVERAGE (D201:D300) Many samples will be available at
http://www.vjbooks.net/excel/samples.htm. 2 10 P age for Notes W ORKING WITH NESTED FUNCTIONS 12.3 D EFINING THE NESTED FUNCTION 12.3.A Nested functions may be written in by hand or with the assistance of the
“Insert Function” dialog. Nesting by hand Once you are familiar with the function names and
arguments/requirements, you can type in the nested function directly into
the cell. In Excel XP, the Formula Bar Assistant makes this process
easier by:
(a) providing the list of arguments/requirements for a function once you
type in the name of the function (in the next figure note that the
Assistant shows the expanded formula notation for AVERAGE with
the requirement “number1” in bold even though I have only typed
“AVERAGE” in the Formula Bar, and
b) using different colors for the parenthesis (brackets) enclosing each
function. This reduces the probability of errors in placing the closing
parenthesis, or in failing to include sufficient number of closing
brackets. Financial Analysis using Excel Figure 143: Using the Formula Bar Assistant 12.3.B N ESTING WITH THE ASSISTANCE OF THE “INSERT FUNCTION”
D IALOG Excel (XP and earlier versions) provide access to the “Insert/Paste
Function” dialog at each level of nesting within a formula. Figure 144: Click on the arrow Assume you want to define the same formula as shown in the previous
figure. You have already user INSERT/FUNCTION to define the outer
function “NORMDIST.” Now, you have to define the inner function
AVERAGE. Place the cursor at the location (within the NORMDIST
function) where the function AVERAGE is to be inserted, and click on the
arrow shown at the left edge of the Formula Bar. A list of recentlyused functions will be displayed. The next figure
illustrates this.
Pick the last option “More Functions” in case the sought function is not in
this list (or, if you have a desire for searching for a “better” function). 2 12 Chapter 12: Nested Functions Figure 145: Recentlyused functions and a link to the “Insert/Paste Function” dialog The “Insert/Paste function” dialog opens. Use this dialog to select or
completely define a function. (Always define the “inner” nested functions
completely in one step.) Figure 146: “Insert/Paste Function” dialog Select the function and complete all function arguments/requirements. 2 13 Financial Analysis using Excel Figure 147: The “inner” nested function is best defined using its dialog When you execute the dialog by clicking on OK, you will be taken back to
the Formula Bar. The updated Formula bar is reproduced in the next
figure. Figure 148: The “inner” function is fully defined You need to define the next argument/requirement for the “outer” function
NORMDIST. (Note that the Formula Bar Assistant is suggesting this by
making bold the font for the requirement “standard_dev.” This
requirement can also be completed using the “Insert/Paste Function”
dialog as you did earlier for the function AVERAGE. Figure 149: The requirement “standard_dev” can be defined with the function STDEV F ORMULA AUTOCORRECTION 12.3.C In case you make a simple error (like forgetting to place a closing
parenthesis), Excel will suggest a correction after you try to finish the
formula.
Evaluate whether Excel has corrected your error correctly; if so, click on
OK. 2 14 Chapter 12: Nested Functions Figure 150: Formula AutoCorrection The AutoCorrection feature is upgraded in the XP version of Excel in
terms of the types of errors AutoCorrected. 12.3.D F ORMULA BAR IDENTIFICATION OF ERROR Even if Autocorrect does not correct the error, Excel will indicate the
location of the error. Assume you use the same formula as before, but
failed to type a comma before the function STDEV. Figure 151: The erroneous formula When you finish the formula and press the ENTER key, Excel will show
the warning reproduced in the next figure. 2 15 Financial Analysis using Excel Figure 152: Formula Error warning Choose the option OK. Look at the Formula Bar. Excel has highlighted
the location where an error was found. Figure 153: Excel locates the location of the error F UNCTION IDENTIFICATION IN THE FORMULA BAR ASSISTANT 12.3.E In Excel XP, the Formula Bar Assistant displays only that function which
directly references the argument/requirement on which you place the
cursor.
For example, if you place the cursor on the cell references used in the
function “AVERAGE,” then the Formula Assistant Bar only shows the
function AVERAGE and placeholders for its requirements. 2 16 Chapter 12: Nested Functions Figure 154: Cursor within the arguments for AVERAGE Cursor is on an argument of the function ISNUMBER24
The Formula Assistant Bar will show only the ISNUMBER function and
placeholders for its requirements. Figure 155: Cursor within the arguments for ISNUMBER but not within the arguments for
AVERAGE Cursor is on an argument of the function IF25
The Formula Assistant Bar will show only the IF function and
placeholders for its requirements. Figure 156: Cursor within the arguments for IF but not within the arguments for ISNUMBER
or AVERAGE 24 The
25The 2 17 function AVERAGE is an argument for the function ISNUMBER.
function ISNUMBER is an argument for the function IF. Financial Analysis using Excel Identification of cells referenced by the function highlighted in the Formula Bar In Excel XP, blue rectangles will identify the cells referenced by the
function currently shown in bold in the Formula Bar Assistant. 12.4 M ULTIPLE NESTING: TIPS
— Always use the “Insert/Paste Function” dialog for defining functions.
— Write the specifics of the innermost function first.
— Complete the innermost function first, and then move up levels.
— Do not forget to include all the arguments/requirements of the outer
functions. This eventuality can be precluded by always using the
“Insert/Paste Function” dialog.
— If the function has an error that cannot be easily identified, use the
Error Checking or Formula Evaluation tools. These tools are taught in
5.5. 2 18 P age for Notes Financial Analysis using Excel CHAPTER 13
A DDINS: ENHANCING EXCEL This chapter discusses the following topics:
— WHAT CAN AN ADDIN DO?
— WHY USE AN ADDIN (AND NOT JUST EXCEL
MACROS/PROGRAMS)?
— ADD–INS INSTALLED WITH EXCEL
— OTHER ADDINS
— THE STATISTICS ADDIN
— CHOOSING THE ADDINS 13.1 A DDINS: INTRODUCTION
An “AddIn” is a software application that adds new functionality to
Excel. The AddIn typically seamlessly fits into the Excel interface,
providing accessibility to its functionality through
— new menus
— new options in existing menus
— new functions
— new toolbars and specific toolbar icons 2 20 Chapter 13: AddIns: Enhancing Excel W HAT CAN AN ADDIN DO? 13.1.A Almost anything an imaginative software developer could create.
Usually, an AddIn provides functionality that is useful for a particular
type of analysis/industry — statistics, finance, real estate, etc. W HY USE AN ADDIN? 13.1.B The AddIn could have its base code written in software languages like C,
C++, FORTRAN, Pascal, etc. This is important because some algorithms
and operations (like simulations) operate best when written in a specific
language. Therefore, the developer uses the best language/tool to create
the functionality and then packages this inside an AddIn. A DD–INS INSTALLED WITH EXCEL 13.2 Some Add–Ins are available in the Microsoft Office CD–ROM and are
installed (but not activated26) along with Excel. I show the use of three
Add–ins. O THER ADDINS 13.3 Many commercially sold AddIns can be almost like separate software just 26 Figure 2 21 540 and Figure 542 show how to activate the Addins Financial Analysis using Excel needing Excel as the “host.” Two examples:
— Crystal Ball risk analysis software
— UNISTAT software for conducting advanced statistics and
econometrics from inside Excel
Hundreds of software companies construct AddIns. The greatest
contribution of this book, if I succeed in doing so, would be the opening of
this massive potential functionality to Excel users. T HE STATISTICS ADDIN 13.4 The Analysis ToolPak AddIn that ships with Excel can conduct several
procedures including descriptives, regression, ANOVA, Ftest, correlation,
Ttests, moving average, and histogram. Let us learn how to use this
“AddIn.” 13.4.A C HOOSING THE ADDINS Choose the menu option TOOLS/ADDINS. You will see several AddIns
as shown in Figure 157. (You may not see all the Add–Ins shown in the
next two figures.) 2 22 Chapter 13: AddIns: Enhancing Excel Figure 157: Selecting an AddIn Figure 158: In Excel XP, the AddIns dialog provides access to “Automation.” This topic is
beyond the scope of this book. You need the “Analysis ToolPak AddIns.” Select — by clicking on it —
the box to the left of these AddIns (shown in Figure 159). Execute the
dialog by clicking on the button OK and wait for some time while the AddIns are “loaded” or “registered” with Excel. An AddIn has to be
loaded/registered before it is available for use. The AddIn remains
loaded across sessions. It is only “unloaded” when you select the option
TOOLS/ADDINS and deselect the AddIn27. 27 If too many AddIns are loaded, Excel may work too slowly, or even freeze. If you find
this problem occurring, then just load the Addin when you are going to use it and
unload it before quitting Excel. 2 23 Financial Analysis using Excel Figure 159: The AddIn pair for data analysis You have activated the “Analysis ToolPak.” At the bottom of the menu
TOOLS, you will see the option “DATA ANALYSIS the bottom— this
option was not there before you accessed the AddIn. (This is illustrated
in Figure 160.)
The statistical procedures are accessed through this new option. Note:
Usually AddIns expose their functionality by creating new menu
options or even new menus. The menu option “Data analysis”
provides the statistics functionality available in “Analysis ToolPak”
and “Analysis ToolPak VB.” The menu options “Optquest” down till
CB Bootstrap” are linked to the Addin “Crystal Ball” (not shipped in
the Office CDROM). 2 24 Chapter 13: AddIns: Enhancing Excel Figure 160: The “Data Analysis” menu option 2 25 P age for Notes Chapter 14: The SOLVER Tool for Constrained Linear Optimization CHAPTER 14
T HE SOLVER TOOL FOR
CONSTRAINED LINEAR
OPTIMIZATION This chapter teaches:
— DEFINING THE OBJECTIVE FUNCTION (CHOOSING THE
OPTIMIZATION CRITERION)
— ADDING CONSTRAINTS
— OPTIONS D EFINING THE OBJECTIVE FUNCTION (CHOOSING 14.1 T HE OPTIMIZATION CRITERION)
The problem of constrained optimization:
For example,
Maximize/Minimize /other (over the choice parameters Xc …) Y = f(X1,
X2 …)
Subject to the inequality constraints:C1 = …. 2 27 Financial Analysis using Excel C2 >=…
C3 <= …
The AddIn “Solver” can solve such models. In the Solver dialog (userinput form), the options equate with the function above. The “mapping” of
the dialog to different parts of the optimization function is shown in the
next table. Table 36: The “Solver” Option in the Solver dialog
…. Equate to the following part of the optimization
function… Equal to:” The optimization function Set Target Cell” Function that needs to be optimized By Changing Cells” The choice parameters Xc…. Subject to the Constraints” The constraints C1, C2, … The Solver permits constraints of inequality. This makes the solver
extremely powerful.
Choose the menu option TOOLS/ADDINS. Choose the AddIn “Solver” as
shown in Figure 161. Execute the dialog by clicking on the button OK. Figure 161: Selecting the Solver AddIn 2 28 Chapter 14: The SOLVER Tool for Constrained Linear Optimization You have activated the “Analysis ToolPak.” If you go to the menu
TOOLS, you will see the option “SOLVER“— this option was not there
before you accessed the AddIn. Please define a sample problem and try it
on an Excel workbook28.
Access the feature through the menu path TOOLS/SOLVER. The dialog
shown in Figure 162 opens. The “Target Cell” contains the formula for
the function you are attempting to optimize.
The “Equal to” area is where you choose the optimization criterion–
— Maximization (Max)
— Minimization (Min)
— The “Value of” option permits a more complex value seek method
than the rough one in TOOLS/GOAL SEEK shown in chapter 15
on page 230. 28 2 29 I do not supply the sample data for most of the examples in chapter 42 to chapter 46.
My experience is that many readers glaze over the examples and do not go through
the difficult step of drawing inferences from a result if the sample data results are
the same as those in the examples in the book. Financial Analysis using Excel Figure 162: Setting the target cell The choice parameters are the numbers the algorithm plays around with
to find the max/min.
You have to tell Excel about the cells that contain these parameters. One
can do it manually, or, an easier option is to click on the button “Guess.”
Excel automatically chooses all the cell references for use in the formula
in J10 (the target cell/objective function). This is illustrated in Figure
163. Figure 163: Selecting the criterion for optimization 2 30 Chapter 14: The SOLVER Tool for Constrained Linear Optimization A DDING CONSTRAINTS 14.2 The optimization function has been defined, as have the “choice
parameters.” At this stage, you have to add the constraints.
Click on the button “Add” and write in a constraint as shown in Figure
164. Figure 164: The first constraint After defining the first constraint, click on the button “Add” (see Figure
164.)
Write the second constraint— see Figure 165. Figure 165: The second constraint Continue with constraint definitions.
After defining the last constraint, execute the dialog by clicking on the
button OK (see Figure 165). 2 31 Financial Analysis using Excel Note:
The constraints are shown in the area “Subject to the Constraints”
as shown in Figure 166. Figure 166: The constraints for the Solver C HOOSING ALGORITHM OPTIONS 14.3 You need to choose the options for the analysis. So, click on the button
“Options.” The dialog shown in Figure 167 opens.
You may want to increase the iterations to 10,000. If you want to relax
the requirements for preciseness, increase the value of “Precision” by
removing some postdecimal zeros.
“Save Model” is used to save each optimization model. You can define
several optimization problems in one workbook.
The other options are beyond the scope of this book. Click on the button
“Continue.” 2 32 Chapter 14: The SOLVER Tool for Constrained Linear Optimization Figure 167: Options in the Solver AddIn Running the Solver Execute the procedure by clicking on the button “Solve.”
The following output can be read from the spreadsheet.
• • 2 33 the optimized value of the Objective Function (that is, the value of
the formula in the cell defined in the box “Set Target Cell”)
is the combination of the choice variables (that is, those whose
value is obtained from the cells defined in the dialog area “By
Changing Cells”) Financial Analysis using Excel Figure 168: The completed constrained optimization dialog 2 34 P age for Notes Financial Analysis using Excel CHAPTER 15
“ IFTHEN” ANALYSIS: SCENARIOS
AND GOAL SEEK This chapter discusses the following topics:
— SETTING THE DESIRED VALUE FOR THE “TARGET” CELL
(THE ONE WITH THE FORMULA THAT REFERENCES THE
“SOLUTION” CELL)
— CHOOSING THE “SOLUTION” CELL
— RUNNING THE UTILITY 15.1 S CENARIOS (FOR “IF THIS ASSUMPTIONTHEN THIS
R ESULT”)
The sample data for this section is in the file “Scenarios.xls.”
The data in columns “C,” “D” and “E” is the size of the labor force in years
“1995,” “2000” and “2010,” respectively, for specific age groups defined in
column “A” and for countries defined in column “B.” The cell “H3” holds
the assumption of the “cumulative or total” growth rate of the labor force
from the year 2010 to 2020. This rate is assumed equal for all age groups
and countries. Column “F” is calculated by multiplying the corresponding
cell in column “E” with “100% plus the growth rate of 40% in cell H3.”
Therefore, column “F” values are 40% higher than the values in column
“E.” The formulas in the cells in column “G” directly reference cell “H3.” 2 36 Chapter 15: “IfThen” Analysis – Scenarios and Goal Seek The cells “H6,” “H7,” and “H8” provide statistical parameters for the year
2020 for the country Algeria (that is, for the cells “F2” to “F14”).
These formulas indirectly reference cell “H3” through the formulas in the
cells “F2” to “F14.” Figure 169: The sample data and formula cells 15.1.A D EFINING THE SCENARIOS Go to the menu option TOOLS/SCENARIOS. The relevant dialog is
shown in the next figure. 2 37 Financial Analysis using Excel Figure 170: The dialog for TOOLS/SCENARIOS before any scenarios are defined. Click on
the button “Add” to define a scenario. Click on “Add” and define the first scenario. The scenario is the next
figure illustrates. The first scenario is named “40.” It assumes that the
value of cell “H3” is 40% or 0.40.
You can make assumptions of several cells, including nonadjacent cells
and cells across sheets. Figure 171: The first scenario A comment has been added to explain the scenario. All the other options
are the defaults — I recommend sticking with them.
After the first scenario is defined, click on the button “Add” and define the 2 38 Chapter 15: “IfThen” Analysis – Scenarios and Goal Seek second scenario. This scenario is named “50” and works on changing the
cell “H3.” Figure 172: The second scenario is named “50” and works on changing the cell “H3” The second scenario assumes that the value of cell “H3” is 50% or 0.50. Figure 173: The second scenario assumes that the value of cell “H3” is 50% or 0.50 The two scenarios are defined. The dialog shows the two scenarios. The
dialog is reproduced in the next figure. Figure 174: The two scenarios are defined 2 39 Financial Analysis using Excel You can define more scenarios. Using the Scenarios Viewing the result of a scenario
Click on the scenario name “40,” followed by the button “Show.” The cell
“H3” will take on the value assumed in the scenario (40% or 0.40). All the
cells whose formula references the “assumption cell H3” will change.
In this example, these cells are those in the column “G” (direct reference
to the assumption cell) and the values of the formulas for the mean,
median and maximum of column “G” (indirect reference to the
“assumption cell H3”). Figure 175: Result of the first scenario Switching over to the view of the result of another scenario
Click on the scenario name “50,” followed by the button “Show.” The cell
“H3” will take on the value assumed in the scenario (50% or 0.50). All the
cells whose formula references the “assumption cell H3” will change.
In this example, these cells are those in the column “G” (direct reference
to the assumption cell) and the values of the formulas for the mean, 2 40 Chapter 15: “IfThen” Analysis – Scenarios and Goal Seek median and maximum of column “G” (indirect reference to the
“assumption cell H3”). Figure 176: Result of second scenario Scenario summary At this stage, the use of scenarios is not very useful because you can only
see the results of one scenario at one time. You may wonder if a better
option is to copy the worksheet and use 40% in cell “H3” of 1 worksheet
and 50% in cell “H3” of the other worksheet. Figure 177: Obtaining a “Scenario Summary” The real power of Scenarios comes from its ability to create a comparative
summary table from the different scenarios. Click on the button
“Summary.” Choose the option “Scenario summary” and the cells whose
values you want to compare across the scenarios. I have chosen the cells 2 41 Financial Analysis using Excel that contain the mean, median and maximum of column “G.”
The “Scenario Summary” is created and displayed on a new worksheet.
Note that the columns compare across scenarios, while the rows display
the formula results you wish to compare. Making the output easily interpretable
You can type in “Assumed Growth Rate,” “Mean,” “Median” and
“Maximum” into cells “C6,” “C8,” “C9,” and “C10,” respectively. Figure 178: The “Scenario Summary” is created and displayed on a new worksheet Using the “Group and Outline” tool Note that Excel has automatically inserted the “plus and minus” signs,
grouping range outlines, and grouping levels (“1” and “2”) to the Scenario
Summary table. Experiment with using these indicators to learn more
about “Grouping and Outlining,” a skill taught in Volume 1: Excel For
Beginners. 2 42 Chapter 15: “IfThen” Analysis – Scenarios and Goal Seek Figure 179: Collapsing the grouped Scenario columns “D” –”F” by clicking on the grouping
indicator “minus” at the top. (The indicator can be seen in the previous figure. The indicator
changes to a “plus.”) Figure 180: Expand the columns so that all the columns can be seen. Now contract the group
of row “4” and the group of row “6” by clicking on the “minus” signs for both of them. (The
indicators can be seen in the previous figure. The indicators change to a “plus.”) 2 43 Financial Analysis using Excel Figure 181: Reexpand the rows by clicking on the two “plus” indicators for the rows Scenariobased Pivot Tables Go to the dialog (userinput form) for TOOLS/SCENARIOS after the
scenarios have been defined.
Click on the button “Summary.”
Choose the option “Scenario Pivot” and the cells whose values you want
use in the data region of the Pivot. Figure 182: Obtaining a “Scenario Pivot” 2 44 Chapter 15: “IfThen” Analysis – Scenarios and Goal Seek The Pivot is created on a new worksheet. This Pivot is simple and small
because we have defined only one “assumption cell,” two scenarios within
this assumption cell, and three “result cells.”
• The number of data rows in the Pivot equals the number of
scenarios.
• The number of data columns equals the number of result cells.
• The number of “pages” in the Pivot is defined by the number of users who have defined assumption cells. Figure 183: The Pivot is created on a new worksheet See Volume 3: Excel– Beyond The Basics to learn how to collaborate and
work simultaneously on one file. If you click on the “Merge” button in the
main Scenarios dialog, then you can merge the scenarios defined by
different users. C hoose a different page — if you have more than one
user — by clicking on its name in the list that opens when you press the
arrow on the right of cell “B1.”
You can create a separate worksheet and a separate chart for each page
using methods taught in Volume 4: Managing & Tabulating Data in
Excel. See that book for more on working with Pivot Reports.
The users who have defined scenarios will be listed. All lists all the 2 45 Financial Analysis using Excel scenarios defined by all users. Use the “Merge” button to merge scenarios
by different users. Figure 184: The users who have defined scenarios will be listed G OAL SEEK (“IF I WANT THIS CELL TO HAVE A 15.2 C ERTAIN RESULT, WHAT VALUE SHOULD THAT
CELL TAKE)
Type this formula into cell F4 of the sample data file ““Advanced
File2.xls.” — This formula will add the values in cells B2, B3… B8 and then add this
sum to the value in cell D4 multiplied by 1.23. Note that the formula
references the cell D4 and the cells B2 to B8.
I will show how Excel permits you to find a value for D4 such that F4
equals a desired “target” value. Assume you want to find the value in cell
D4 that will make the value of the formula in F4 equal to 10,000,000,000. 2 46 Chapter 15: “IfThen” Analysis – Scenarios and Goal Seek S ETTING THE DESIRED VALUE FOR THE “TARGET” CELL (THE ONE 15.2.A W ITH THE FORMULA THAT REFERENCES THE “SOLUTION” CELL) Click on the cell “F4”— that is, the cell for which a desired value is
“sought.” Then choose the menu option TOOLS/GOAL SEEK. The
relevant dialog is shown in Figure 185.
Enter the desired/target value into the box “to value” as shown in Figure
186. Figure 185: The “Goal Seek” dialog C HOOSING THE “SOLUTION” CELL 15.2.B You want F4 to achieve the given value by changing the value in cell D4.
So enter D4 in the box “By changing cell” as shown in Figure 18629. 29 2 47 Alternatively, click on the box marked by the arrow and then choose the cell from the
sheet. Financial Analysis using Excel Figure 186: Choosing the “solution” cell Running the utility Execute the dialog by clicking on the button OK. You will be told if a
solution was found. Go and look at cell D4. The value in there is the
desired one— the value that makes F4 = “target or desired value.” 2 48 Chapter 15: “IfThen” Analysis – Scenarios and Goal Seek COLUMNS, 11, 48, 199 A COMMENT, 11 A1, 20, 23, 204 COMMENTS, 10, 31, 48 ABS, 176 COMPOUND, 85 ACCRINT, 128, 129, 140 CONDITIONAL FORMATTING, 12 ACCRINTM, 136, 137, 140 CONFIDENCE, 65, 66, 67 ADD–IN, 214 CONSOLIDATION, 13 ADDINS, 13, 214, 216, 217, 222 CONSTRAINTS, 221 ADD–INS INSTALLED WITH EXCEL,
214 CONTROLLING CELL REFERENCE
BEHAVIOR WHEN COPYING AND
PASTING FORMULAE (USE OF THE,
31 ADDRESS, 200
AND, 31, 48, 85, 98, 116, 166, 184, 186,
188, 189, 190, 191, 193, 214
ANOVA, 178, 216
AREAS, 200
AUDITING, 12, 72, 74, 75, 76, 77, 80
AUTOCORRECT, 13
AUTOFORMAT, 12
AVEDEV, 179
AVERAGE, 62, 146, 147, 163, 178, 204,
205, 206, 208, 210, 211
AVERAGEA, 163 COPY, 9, 32, 33, 34, 35, 38
COPYING AND PASTING, 31, 32
COPYING AND PASTING A FORMULA
TO OTHER CELLS IN A DIFFERENT
ROW AND COLUMN, 31
COPYING AND PASTING A FORMULA
TO OTHER CELLS IN THE SAME
COLUMN, 31
COPYING AND PASTING A FORMULA
TO OTHER CELLS IN THE SAME
ROW, 31
COPYING AND PASTING FORMULAS
FROM ONE WORKSHEET TO
ANOTHER, 31 B CORREL, 63, 64, 180 BOND, 116 CORRELATION, 166
COS, 77, 78, 79, 80 C
CASH FLOW, 98 COUNTA, 163, 166, 169 CELL, 20, 48, 146, 184, 185, 230 COUNTBLANK, 166, 170 CELL REFERENCE, 20 COUNTIF, 166, 173, 174, 175 CELLS, 11, 12, 48, 125 COUNTING AND SUMMING, 166 CENTRAL TENDENCY, 146 COUPDAYBS, 119, 121, 125, 139 CHOOSE, 175, 193, 194, 197, 198, 202,
203, 204 COUPDAYS, 119, 120, 125, 139 CLEAR, 10 COUPNCD, 122, 123, 124, 125, 139 COLUMN, 12, 48, 199 2 49 COUNT, 163, 166, 167, 168, 169 COUPNUM, 124, 125, 139 COUPDAYSNC, 119, 121, 125, 139 Financial Analysis using Excel COUPPCD, 123, 125, 139
COVAR, 180 F CROSS SERIES RELATIONS, 166 FALSE, 114, 157, 158, 167, 168, 170, 184,
185, 186, 187, 188, 189, 190, 191, 192,
194, 195, 197, 198, 199, 202, 203 CUMIPMT, 90, 91, 92, 108 FILE, 9, 49 CUMPRINC, 89, 90, 91, 92, 108 FILL, 10 CUMULATIVE INTEREST AND
PRINCIPAL PAID ON A LOAN, 85 FILTER, 13 CUMULATIVE INTEREST PAID ON A
LOAN, 85 FORM, 13 COVARIANCE, 166 CUMULATIVE REPAYMENT OF
PRINCIPAL, 85 FIND, 10
FORMAT, 12, 125 CUSTOMIZE, 13 FORMULA, 10, 20, 22, 31, 48, 57, 72, 77,
80, 230 CUT, 9, 45 FORMULA BAR, 10, 22 CUTTING AND PASTING FORMULAE,
31 FREEZE PANES, 13 D
DATE, 76
DB, 110, 111, 112, 113
DDB, 111, 112, 113
DEGREES, 79
DELETE SHEET, 10
DEPRECIATION, 98
DEVIATIONS FROM THE MEAN, 166
DEVSQ, 178, 179
DISC, 132, 133, 140
DISPERSION, 146 FUNCTION, 11, 57, 58, 59, 63, 65, 67, 68,
87, 88, 89, 90, 93, 95, 99, 100, 101, 102,
103, 104, 105, 106, 109, 110, 111, 114,
119, 120, 121, 122, 123, 124, 126, 127,
128, 129, 130, 131, 133, 134, 135, 136,
138, 139, 140, 141, 143, 146, 147, 148,
149, 150, 152, 153, 154, 156, 157, 161,
162, 167, 169, 170, 171, 173, 174, 178,
180, 181, 184, 192, 196, 199, 206, 214
FUNCTION / FINANCIAL, 11, 87, 88, 89,
90, 95, 105, 106, 110, 111, 114, 126, 129,
130, 131, 140, 141, 143
FUNCTION / INFORMATION, 11, 170
FUNCTION / LOGICAL, 11
FUNCTION / LOOKUP, 11, 199
FUNCTION / MATH & TRIG, 11 DURATION, 125, 126, 139 FUNCTION / STATISTICAL, 11, 148, 149,
150, 152, 153, 154, 156, 157, 158, 161,
162, 167, 169, 174, 178 E FUNCTION / TEXT, 11 EDIT, 9, 32, 33, 34, 35, 36, 38, 45, 49, 50,
52, 53, 54, 55 FUNCTION WITHIN A FUNCTION, 57 EFFECT, 85, 94, 95 FUTURE VALUES, 98 ERROR.TYPE, 184, 197, 198 FV, 98, 105, 106, 107, 108 EVEN, 184, 187, 188 FVSCHEDULE, 98, 106, 107, 108 FUNCTIONS ENDING WITH AN, 146 EXP, 176
EXPONENTIAL, 166 G EXTERNAL DATA, 13 GEOMEAN, 150 2 50 Index GEOMETRIC MEAN, 146 ISODD, 184, 195 GO TO, 10 ISREF, 184, 193 GOAL SEEK, 12, 223, 241 ISTEXT, 184, 192, 193, 194 GROUP AND OUTLINE, 13 K
H
HARMEAN, 149 KURT, 162
KURTOSIS, 146 HARMONIC MEAN, 146
HEADER, 10 L HEADER AND FOOTER, 10 LARGE, 146, 155 HELP, 14 LINKS, 10 HIDE, 13 LN, 176 HYPERLINK, 12, 200 LOAN REPAYMENTS, 85 I
IF, 98, 166, 175, 184, 185, 187, 188, 190,
193, 194, 197, 198, 202, 203, 211
INDEX, 200
INDIRECT, 200
INSERT, 11, 40, 42, 43, 57, 59, 63, 65, 67,
68, 87, 88, 89, 90, 93, 94, 95, 99, 100,
101, 102, 103, 104, 105, 106, 109, 110,
111, 114, 119, 120, 121, 122, 123, 124,
126, 127, 128, 129, 130, 131, 133, 134,
135, 136, 138, 139, 140, 141, 143, 147,
148, 149, 150, 152, 153, 154, 156, 157,
161, 162, 167, 169, 170, 171, 173, 174,
175, 178, 180, 181, 192, 196, 199, 206 LOG, 166, 177
LOG10, 177 M
MACROS, 13, 214
MATCH, 200
MAX, 154, 155, 163
MAXA, 154, 155, 163
MDURATION, 125, 126, 139
MEDIAN, 146, 152
MIN, 155, 163
MINA, 155, 163 INTEREST, 85, 116 MIRR, 98, 103, 108 INTRATE, 138, 140 MODE, 80, 146, 152 IPMT, 87, 88, 91, 92, 108 MOVE OR COPY SHEET, 10 IRR, 98, 102, 104, 108 MULTIPLE RANGE REFERENCES, 57 ISBLANK, 184, 192, 194 MULTIPLYING/DIVIDING/SUBTRACTI
NG/ADDING ALL CELLS IN A
RANGE BY A NUMBER, 48 ISERR, 184, 196
ISERROR, 184, 196, 197, 198
ISEVEN, 184, 195
ISLOGICAL, 184, 192, 194 N ISNA, 184, 196, 198 N, 85, 168, 184, 196, 197, 198, 199 ISNONTEXT, 184, 192, 194 NA, 11, 40, 43, 79, 168, 184, 196, 197, 198 ISNUMBER, 184, 192, 194, 211 NOMINAL, 85, 95, 96
NORMAL DENSITY FUNCTION, 166 2 51 Financial Analysis using Excel NORMDIST, 206, 208
NOT, 31, 48, 85, 184, 185, 188, 189, 190,
191, 192, 193, 194, 196, 197, 198, 214 PASTE, 9, 10, 31, 32, 33, 34, 36, 43, 45, 49,
50, 52, 53, 54, 58
PASTE SPECIAL, 10, 49, 50, 52, 53, 54 NOT FUNCTION, 184 PASTING ALL BUT THE BORDERS, 48 NOT(ISBLANK), 184, 192, 194 PASTING COMMENTS, 48 NOT(ISERR), 184, 196 PASTING DATA VALIDATION, 48 NOT(ISERROR), 184, 197, 198 PASTING ONLY FORMATS, 48 NOT(ISLOGICAL), 184, 192, 194 PASTING ONLY THE FORMULA, 31, 48 NOT(ISNA), 184, 196, 198 PASTING THE RESULT OF A
FORMULA, BUT NOT THE
FORMULA ITSELF, 31 NOT(ISNUMBER), 184, 192, 194
NOT(ISREF), 184, 193
NOT(ISTEXT), 184, 193, 194 PAYMENT ON INTEREST AND
PRINCIPAL, 85 NPER, 85, 86, 93, 94, 99, 106, 108 PAYMENT ON INTEREST ONLY, 85 NPV, 98, 100, 101, 102, 104, 108 PAYMENT ON PRINCIPAL ONLY, 85
PEARSON, 180 O PERCENTILE, 146, 153, 154 OBJECT, 10, 12 PERCENTRANK, 156 OBJECTIVE FUNCTION, 221 PIVOT REPORT, 13 ODD, 184 PMT, 87, 88, 89, 91, 92, 108 ODDFPRICE, 129 PPMT, 87, 88, 91, 92, 108 ODDFYIELD, 130 PRECEDENTS, 72 ODDLPRICE, 131 PRESENT VALUES, 98 ODDLYIELD, 131 PRICE, 116, 128, 140 OFFICE ASSISTANT, 14 PRICEDISC, 132, 134, 140 OFFICE CLIPBOARD, 10
OFFSET, 200 PRICEMAT, 120, 127, 128, 129, 130, 131,
134, 135, 136, 137, 138, 139, 140, 142,
143 ONLINE COLLABORATION, 12 PRINT AREA, 9 OPEN, 9 PRINT PREVIEW, 9 OPTIMIZATION, 221 PRODUCT, 166, 171 OPTIMIZATION CRITERION, 221 PROPERTIES, 9 OPTIONS, 13, 21, 23, 31, 48 PROTECTION, 12 OR, 85, 98, 146, 184, 186, 187, 188, 189,
190, 191, 193, 198 PV, 91, 98, 99, 100, 102, 106, 108 P
PAGE BREAK, 10, 11 Q
QUARTILE, 146, 153 PAGE BREAK PREVIEW, 10
PAGE SETUP, 9 2 52 Index R SKEWNESS, 146
SLN, 109, 110, 112, 113 R1C1, 20, 23 SMALL, 156 RANK, 146, 157 SOLVER, 221, 223 RATE, 85, 86, 93, 106, 108 SORT, 13 RATE VERSUS NPER, 98 SPEECH, 12 RATES OF RETURN, 98 SPELLING, 12 RECEIVED, 138, 140 SPLIT, 13 REDO, 9 SPSS, 4, 6 REFERENCES ALLOWED IN A
FORMULA, 20 SQRT, 176 REFERENCING A BLOCK OF CELLS, 20
REFERENCING CELLS FROM
ANOTHER WORKSHEET, 20
REFERENCING CORRESPONDING
BLOCKS OF CELLS / ROWS /
COLUMNS FROM A SET OF
WORKSHEETS, 20
REFERENCING ENTIRE COLUMNS, 20
REFERENCING ENTIRE ROWS, 20
REFERENCING NON– ADJACENT
CELLS, 20 STANDARD DEVIATION, 146
STANDARDIZE, 178
STATA, 6
STATUS BAR, 10
STDEV, 67, 68, 146, 157, 158, 163, 178,
208, 209
STDEVA, 146, 157, 158, 159, 163
STDEVP, 146, 158, 163
STDEVPA, 146, 158, 163
STYLE, 12, 20 REPLACE, 10 SUBTOTALS, 13 RISK ANALYSIS, 98 SUM, 28, 166, 167, 170 ROW, 12, 48, 199 SUM OF THE SQUARES OF
DIFFERENCES ACROSS TWO
VARIABLES, 167 ROWS, 11, 48, 199
ROWS TO COLUMNS, 48
RSQ, 180 SUM OF THE SUM OF THE SQUARES
OF TWO VARIABLES, 166
SUMIF, 166, 173, 175 S
SAVE, 9
SAVE AS, 9
SAVE AS WEB PAGE, 9
SAVE WORKSPACE, 9
SCENARIOS, 12, 115, 231, 232, 238
SEARCH, 9 SUMPRODUCT, 166, 171
SUMX2MY2, 181
SUMX2PY2, 180
SUMXMY2, 181
SYD, 109, 110, 111, 112, 113 T SHARE WORKBOOK, 12
SHEET, 12 T BILL FORMULAE, 116 SIGN, 31, 175 TABLE, 13, 46 SKEW, 161 2 53 T, 18, 116, 140, 141, 142, 143, 144, 216 TBILLEQ, 140, 141, 142 Financial Analysis using Excel TBILLPRICE, 141, 142, 143 VAR, 146, 157, 163 TBILLYIELD, 143, 144 VARA, 146, 157, 158, 163 TIME, 32 VARIANCE, 146 TOOLBARS, 10, 76 VARP, 146, 158, 163 TOOLS, 12, 13, 21, 23, 72, 74, 75, 76, 77,
80, 115, 216, 217, 218, 222, 223, 231,
232, 238, 241 VARPA, 146, 158, 163 TRACE, 72, 74
TRACING THE CELL REFERENCES
USED IN A FORMULA, 72 VDB, 114
VIEW, 10, 21, 22, 76 W TRACING THE FORMULAS IN WHICH
A PARTICULAR CELL IS
REFERENCED, 72 WEB, 13 TRANSPOSE, 200 WORKSHEETS, 11, 32 WINDOW, 13, 72, 76 TRIAL, 194
TRIMMEAN, 148, 149, 151 X TRIMMED MEAN, 146 XIRR, 98, 102, 104, 108 TRUE, 114, 157, 158, 167, 168, 170, 184,
185, 186, 187, 188, 189, 190, 191, 192,
194, 195, 196, 197, 198, 199, 202, 203 XNPV, 98, 101, 102, 104, 108 TYPE, 106, 184, 185, 193, 194 Y
YEAR, 85 U YIELD, 116, 127, 140 UNDO, 9, 45, 55 YIELDDISC, 134, 140
YIELDMAT, 136, 140 V
VALIDATION, 13
VALUE, 146, 168, 184, 194, 196, 197, 198,
230 Z
ZOOM, 11 2 54 ...
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 Spring '10
 Alex

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