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Objectives
Describe the PMT (payment) and FV (future value) functions
Use the PMT and FV functions Use the IF function to help in the decision-making
process: provide decision making
Define and use a mixed reference Use the Statistical functions , AVERAGE, MAX, MIN,
COUNT and COUNTA functions Use the logical functions AND & OR
Overview Learn to use spreadsheets as a tool in decision
making Use financial functions Use statistical functions Use absolute, relative, and mixed cell references
Analysis of a Car Loan
Can I afford it? How do I calculate
for: rebates Down payments interest rates the number of
payments
Analysis of a Car Loan
Set up a worksheet template with initial conditions
Use a PMT function which requires interest rate/period, number of periods, and amount of loan Payment amounts and the number of payments
are usually expressed in months, while interest rates are annual rates. Divide the interest rate by 12 to come up with a monthly rate
The amount of the loan (present value) should be expressed as a negative number.
PMT Function
Remember : A function is a predefined formula
=PMT(B8/12;B9*12;-B7)
Interest rate per period ( annual rate divided by 12)
Number of periods( 4 years x 12 months/year
A mount of loan ( as a negative amount)
How Much Money Will I Have at Retirement?
The Future Value (FV) function to return the future value of a series of payments
Use the FV function which requires the expected rate of return, the number of periods, and the investment each period.
FV Function (the rate of return)
Use the FV function which requires the expected rate of return, the number of
periods, and the investment each period.
Amount at retirement = FV (rate of return, Term, Periodic payment)
B17
B15
B16B14
= FV (A1, A2, -A3)
Inserting a Function
Use the Insert Function command from the Insert menu
Use the list box to select the name of the function functions categorized by function
Let the Wizard help you enter the arguments
Isolate Your Assumptions
Enter your assumptions (the arguments needed for the function) into cells and use those cells for your arguments For example, in the PMT function, enter the
loan amount, number of payments, and interest rate into cells, then use those cells in the PMT function
Change the values in those cells to test different scenarios Easier than editing the formula when you want
to change on or more of your variables
Getting the most from Excel
Relative versus absolute addressing in a worksheet Knowing the difference and when to use each
when copying makes setting up your worksheet more efficient and more accurate
Mixed references Either the row or the column is absolute; the
other is relative Don’t forget to isolate your assumptions!!
PMT Function
=PMT(B8/12;B9*12;-$B$7)
Interest rate per period ( annual rate divided by 12)
Number of periods( 4 years x 12 months/year
A mount of loan ( as a negative amount)
Relative versus absolute addressing in a worksheet
Mixed referencesEither the row or the column is absolute; the other is relative
FV function=FV(C$5;$B6;-$D$3)
Mixed reference to cell C$5.
Mixed reference to cell $B6
Absolute reference to cell D3
Using Functions in ExcelStatistical Functions
Statistical Functions: MAX,MIN, AVERAGE, COUNT and COUNTA Use functions instead of arithmetic
expressions IF function enhances decision
making allows for different results based on
different conditions
Average Function
=(A1+A2+A3)/3 =AVERAGE(A1:A3) =AVERAGE(A1:A3;200) =AVERAGE(A1:A3;C2)
MAX,MIN Functions
=MAX(A1:A3)
=MIN(A1:A3)
COUNT and COUNTA Functions
=COUNT(A1:A3)Returns the number of numeric
entries. =COUNTA(A1:A3) Return the number of numeric and
text entries.
The IF function
Allows for different results, based on a condition for example, if you work over forty hours in a
week, you will receive overtime pay Requires three arguments:
a condition, which Excel must be able to evaluate as true or false
a value if true a value if false
The value if true and value if false may contain additional (nested) IF functions for more complex decisions.
IF functions
Enables decision making to be implemented within a worksheet.
=IF(condition,value-if-true, value-if-false)
Condition is either true or false
Value returned for a true condition
Value returned for a true condition
Operators that used with IF Function
Operator Description = Equal to <> not equal to < less than > Greater than <= less than or equal to >= Greater than or equal to
AND & OR
And: return true if all its arguments are true, return false if any argument are false.
OR: returns true if any arguments are true, return false if all arguments are false
Summary
Financial functions (PMT and FV) Statistical functions (MAX, MIN,
AVERAGE, and COUNT) Decision making functions (IF ) Isolate and clearly label initial
assumptions
