Excel Financial Functions

The Most Important

Excel Functions

Lesson 4: Excel Spreadsheets Financial Functions (53)

In annex 4 you have found a description of all 53 Excel functions in the "Financial" category. Below is the list of the 4 most useful ones.

If you are using a version of Excel earlier than 2007 you need to activate the "Excel Analysis Toolpack" to make some of the functions above available.

The RATE Function

The question to which RATE  brings an answer to is:
- What is the real interest rate if they ask me for a certain amount each period to pay a loan?

Here is the formula in cell A6:
=RATE(A1,-A2,A3,A4,A5)*12

Notes on the formula: The payment argument is negative (-A2); If you use months as periods and you want an annual rate you multiply by 12, if you use a years as periods and you want an annual rate you don't multiply......; If you don't use the "Percentage" format in cell A6 the result of this example will be 0.05; The formula could also be =RATE(A1,-A2,A3)*12 the arguments in A4 and A5 being optional

The PMT Function

The question to which PMT brings an answer to is:
- If I borrow a certain amount of money and I want it repaid at the end of a certain period of time what will be the periodic payment?

Here is the formula in cell A6:
=PMT(A1/12,A2,A3,A4,A5)

Notes on the formula: If you don't use the "Percentage" format in cell A1 enter 0.05; If you use months as periods the rate must be divided by 12 (A1/12), if you use weeks then you divide by 52 (A1/52), if there are 4 payments per year you will divide the rate by 4 (A1/4)and if the payment is annual you don't divide the rate argument (A1) ; The formula could also be =PMT(A1/12,A2,A3) the arguments in A4 and A5 being optional; If you want the payment to show as a positive value add a minus sign before the equal sign (=-PMT(A1/12,A2,A3,A4,A5))

The FV Function (Future value)

The question to which FV  brings an answer to is:
- If I put a certain amount of money in the bank each month how much money will I have saved at the end of a certain period of time?

Here is the formula in cell A6:
=FV(A1/12,A2,A3,A4,A5)

Notes on the formula: If you don't use the "Percentage" format in cell A1 enter 0.05; If you use months as periods the rate must be divided by 12 (A1/12), if you use weeks then you divide by 52 (A1/52), if there are 4 payments per year you will divide the rate by 4 (A1/4)and if the payment is annual you don't divide the rate argument (A1) ; The formula could also be =FV(A1/12,A2,A3) the arguments in A4 and A5 being optional; If you want the RESULT to show as a positive value add a minus sign before the equal sign (=-FV(A1/12,A2,A3,A4,A5))

The NPER Function

The question to which NPER  brings an answer to is:
- How many months would it take me to repay a certain loan at a certain interest rate if I pay a certain amount each month?

Here is the formula in cell A6:
=NPER(D1/12,-D2,D3,D4,D5)

Notes on the formula: If you don't use the "Percentage" format in cell A1 enter 0.05; The second argument MUST BE NEGATIVE; If you use months as periods the rate must be divided by 12 (A1/12), if you use weeks then you divide by 52 (A1/52), if there are 4 payments per year you will divide the rate by 4 (A1/4)and if the payment is annual you don't divide the rate argument (A1) ; The formula could also be =NPER(A1/12,A2,A3) the arguments in A4 and A5 being optional;

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