1. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
WEEK 03, Chapter 2
Formulas and Functions
by Mary Anne Poatsy, Keith Mulbery, Lynn Hogan, Amy Rutledge, Cyndi Krebs, Eric Cameron, Rebecca Lawson
This chapter reviews how to perform quantitative analysis, focusing on formulas and functions.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.  

2. Performing Other Financial Calculations
Additional FINANCIAL functions:
to calculate payment or investment values.
=PV(rate,nper,pmt)
calculates the total PRESENT value of a series of payments that will be made in the future.
=FV(rate,nper,pmt)
calculates the FUTURE value of an INVESTMENT, given a fixed interest rate, term, and periodic payment.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.

3. Calculating Payments with the PMT Function
The PMT financial function calculates the periodic payment for a loan with a fixed interest rate and term length
PMT 3 required arguments:
Interest rate (rate)
Number of periods (nper)
Present value (pv)
The financial function PMT can be used to compute a payment on a loan amount given a fixed interest rate and payment periods. It is important that all terms use the same time units. Given a monthly interest rate and the number of months, PMT will compute a monthly payment.
You may need to divide an annual interest rate by 12 to obtain a monthly rate. You may need to multiply the number of years by 12 to produce the number of months. The result of the PMT function is a negative value. You can negate the present value to return a positive value.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.  

4. Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Using the PMT Function
Figure 2.27 illustrates use of the PMT function in a car loan worksheet.
It returns the monthly payment based upon a monthly interest rate stored in B6, the number of months stored in B8, and the loan amount stored in B3.
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.