Financial Functions in Excel

Financial Functions in Excel

Here’s a summary of some of the most commonly used financial functions in Excel, along with examples.

1. PV Function (Present Value):

– Calculates the present value of an investment or loan.
– Syntax: PV(rate, nper, pmt, [fv], [type])
– Example: `PV(0.05/12, 36, -500, 0)` calculates the present value of a 36-month loan with monthly payments of $500 at a 5% annual interest rate.

2. FV Function (Future Value):

– Calculates the future value of an investment or loan based on a constant interest rate.
– Syntax: `FV(rate, nper, pmt, [pv], [type])`
– Example: `FV(0.06, 4, -1000, 0, 0)` calculates the future value of a 4-year investment with annual payments of $1000 at a 6% annual interest rate.

3. PMT Function (Payment):

– Calculates the periodic payment for an annuity or loan.
– Syntax: `PMT(rate, nper, pv, [fv], [type])`
– Example: `PMT(0.08/12, 240, 200000)` calculates the monthly payment for a 20-year mortgage with a principal of $200,000 at an 8% annual interest rate.

4. NPER Function (Number of Periods):

– Calculates the number of periods required to pay off a loan or reach an investment goal.
– Syntax: `NPER(rate, pmt, pv, [fv], [type])`
– Example: `NPER(0.07/12, -500, 15000)` calculates the number of months it takes to pay off a loan of $15,000 with monthly payments of $500 at a 7% annual interest rate.

5. RATE Function (Interest Rate):

– Calculates the interest rate per period for an annuity or loan.
– Syntax: `RATE(nper, pmt, pv, [fv], [type], [guess])`
– Example: `RATE(48, -250, 10000)` calculates the monthly interest rate for a 4-year loan with monthly payments of $250 and a principal of $10,000.

6. NPV Function (Net Present Value):

– Calculates the net present value of a series of cash flows.
– Syntax: `NPV(rate, value1, [value2], …)`
– Example: `NPV(0.1, -10000, 3000, 4000, 5000)` calculates the net present value of a project with an initial investment of $10,000 and cash inflows of $3,000, $4,000, and $5,000 in the following years, discounted at a 10% rate.

7. IRR Function (Internal Rate of Return):

– Calculates the internal rate of return for a series of cash flows.
– Syntax: `IRR(values, [guess])`
– Example: `IRR(-10000, 3000, 4000, 5000)` calculates the internal rate of return for the same project described in the NPV example.

8. DDB Function (Double Declining Balance Depreciation):

Calculates the depreciation of an asset for a specific period using the double declining balance method.
Example:

– Syntax: DDB(cost, salvage, life, period, [factor])

9. SLN Function (Straight-Line Depreciation):

Calculates the depreciation of an asset for each period using the straight-line method.

– Syntax: SLN(cost, salvage, life)

**Remember:**

– Use consistent units for interest rates and periods (e.g., monthly interest rate for monthly payments).
– Consider using the optional `type` argument to specify payments at the beginning or end of periods.
– Explore other financial functions in Excel for more specialized calculations.

<< Go Back to Excel Function Categories | Excel Functions | Learn Excel