Mathematics of Finance Workshop

9.1 Interest
9.2 Annuities and Future Value
9.3 Present Value of an Annuity; Amortization
Project Management
Group Members
Name : Camila Gutierrez
Financial Functions (Reference)
Function Description
CUMIPMT Returns the cumulative interest paid between two periods

CUMPRINC Returns the cumulative principal paid on a loan between two periods

EFFECT Returns the effective annual interest rate

FV Returns the future value of an investment

IPMT Returns the interest payment for an investment for a given period

IRR Returns the internal rate of return for a series of cash flows
NOMINAL Returns the annual nominal interest rate
NPER Returns the number of periods for an investment
Returns the net present value of an investment based on a series of
NPV
periodic cash flows and a discount rate
PMT Returns the periodic payment for an annuity
Returns the payment on the principal for an investment for a given
PPMT
period
PV Returns the present value of an investment
RATE Returns the interest rate per period of an annuity

ACCRINT Returns the accrued interest for a security that pays periodic interest

Returns the accrued interest for a security that pays interest at

ACCRINTM maturity

Returns the depreciation for each accounting period by using a

AMORDEGRC
depreciation coefficient
AMORLINC Returns the depreciation for each accounting period

COUPDAYBS Returns the number of days from the beginning of the coupon period
to the settlement date

COUPDAYS Returns the number of days in the coupon period that contains the
settlement date
Returns the number of days from the settlement date to the next
COUPDAYSNC
coupon date
COUPNCD Returns the next coupon date after the settlement date

COUPNUM Returns the number of coupons payable between the settlement date
and maturity date
COUPPCD Returns the previous coupon date before the settlement date
Returns the depreciation of an asset for a specified period by using
DB
the fixed-declining balance method
Returns the depreciation of an asset for a specified period by using
DDB the double-declining balance method or some other method that you
specify
 DISC Returns the discount rate for a security
Converts a dollar price, expressed as a fraction, into a dollar price,
DOLLARDE
expressed as a decimal number
Converts a dollar price, expressed as a decimal number, into a dollar
DOLLARFR
price, expressed as a fraction
Returns the annual duration of a security with periodic interest
DURATION
payments
Returns the future value of an initial principal after applying a series of
FVSCHEDULE
compound interest rates
INTRATE Returns the interest rate for a fully invested security

ISPMT Calculates the interest paid during a specific period of an investment

Returns the Macauley modified duration for a security with an

MDURATION assumed par value of $100

Returns the internal rate of return where positive and negative cash
MIRR flows are financed at different rates

Returns the price per $100 face value of a security with an odd first
ODDFPRICE period

ODDFYIELD Returns the yield of a security with an odd first period

Returns the price per $100 face value of a security with an odd last
ODDLPRICE period

ODDLYIELD Returns the yield of a security with an odd last period

Returns the number of periods required by an investment to reach a
PDURATION 
specified value

PRICE Returns the price per $100 face value of a security that pays periodic
interest
PRICEDISC Returns the price per $100 face value of a discounted security

PRICEMAT Returns the price per $100 face value of a security that pays interest
at maturity

RECEIVED Returns the amount received at maturity for a fully invested security

RRI  Returns an equivalent interest rate for the growth of an investment

SLN Returns the straight-line depreciation of an asset for one period

Returns the sum-of-years' digits depreciation of an asset for a

SYD specified period

TBILLEQ Returns the bond-equivalent yield for a Treasury bill

TBILLPRICE Returns the price per $100 face value for a Treasury bill
TBILLYIELD Returns the yield for a Treasury bill
Returns the depreciation of an asset for a specified or partial period
VDB by using a declining balance method

XIRR Returns the internal rate of return for a schedule of cash flows that is
not necessarily periodic
Returns the net present value for a schedule of cash flows that is not
XNPV
necessarily periodic
YIELD Returns the yield on a security that pays periodic interest
 Returns the annual yield for a discounted security; for example, a
YIELDDISC
Treasury bill

YIELDMAT Returns the annual yield of a security that pays interest at maturity
Mathematics of Finance Workshop
9.1 Interest

Applications 9.1
Saving for college At the birth of their child, the Fieldsons deposited $7,000 in an account paying 6% interest,
compounded quarterly. How much will be available when the child turns 18?

Rate 1.5% quarterly 6.14%

Nper 72 quarters 18
Presente value -7000 -$ 7,000.00
Future Value $ 20,448.11 $ 20,448.11

Planning for retirement When Jim retires in 12 years, he expects to live lavishly on the money in a retirement account
that is earning interest, 7,5% compounded semiannually. If the account now contains $147,500, how much will be
available at retirement?

Rate 3.75% 7.64%

Nper 24 12
Presente value - 147,500.00 -147500
Future Value 356,867.13 $ 356,867.13

Real estate investing Property values in the suburbs have been appreciating about 11% annually. If this trend continues,
what will a $137,000 home be worth in four years? Give the result to the nearest dollar.

Rate 11.00%
Nper 4
Presente value - 137,000.00
Future Value 207,975.65

Comparing banks Bank One offers a passbook account with 4.35% annual rate, compounded quarterly. Bank Two offers
a money market account at 4.3%, compounded monthly. Which account provides the better growth? (Hint: Find the
effective rates.)

Bank One 4.35% annual rate

Bank Two 4.30% compounded monthly
Bank Two

Fly now, pay later For a 7-day Hawaii vacation, Beth borrowed $2,570 for 9 months at an annual rate of 11.4%,
compounded monthly. What did she owe?
Fly now, pay later For a 7-day Hawaii vacation, Beth borrowed $2,570 for 9 months at an annual rate of 11.4%,
compounded monthly. What did she owe?

Rate 12.01% annual 0.95%

Nper 0.75 years 9
Present Value 2,570 2570
Future Value -$ 2,798.27 -$ 2,798.27

Adding to an investment To prepare for his retirement in 14 years, Jay deposited $12,000 in an account paying 7.5%
annual interest, compounded monthly. Ten years later, he deposited another $12,000. How much will be available at
retirement?

Rate 7.76% Compounded monthly

Nper 14 years
Present Value - 12,000
Future value for 10 years $ 34,179.94
Present value ending first 10 years $ 16,183.19
Nper 4 years
Future value for 10 years $ 50,363.13

Changing rates Ten years ago, a man invested $1,100 in a 5-year certificate ofdeposit paying 10%, compounded
monthly. When the CD matured, he invested the proceeds in another 5-year CD paying 8%, compounded
semiannually. How much is available now?
g 6% interest,

Years

a retirement account
how much will be

If this trend continues,

rterly. Bank Two offers

wth? (Hint: Find the

ate of 11.4%,
ate of 11.4%,

ccount paying 7.5%

h will be available at

, compounded
pounded
Mathematics of Finance Workshop
9.2 Annuities and Future Value

Applications 9.2
Saving for a vacation For next year’s vacation, the Phelps family is saving $200 each month in an account paying 6% a
interest, compounded monthly. How much will be available a year from now?

Rate 0.50%
Nper 12
Present value 0
Payment -200
Future value $ 2,467.11

Planning for retirement Hank’s regular $1,300 quarterly contributions to his retirement account have earned 6.5% an
interest, compounded quarterly, since he started 21 years ago. How much is in his account now?

Rate 1.625%
Nper 84
Present value 0
Payment -1300
Future value $ 229,839.59

Saving for college A mother has been saving regularly for her daughter’s college—$25 each month for 11 years. The m
been earning 7 1/2% annual interest, compounded monthly. How much is now in the account?

Rate 0.2917%
Nper 132
Present value 0
Payment -25
Future value $ 4,018.21

Comparing accounts Which account will require the lower annual contributions to fund a $10,000 obligation in 20 ye
Compare the yearly total contributions.) Bank A 5.5%; annually Bank B 5.35%; anual interest, compounded monthly

Bank A Bank B
Rate 5.50% 5.48%
Nper 20 20
Present value=loan 10,000 10,000
Payment -$ 836.79 -$ 835.41

Avoiding a balloon payment The last payment of a home mortgage is a balloon payment of $47,000, which the owner
to pay in 12 years. How much extra should he start includ-ing in each monthly payment to eliminate the balloon paym
mortgage is at 10.2%, compounded monthly.

Rate 0.0085
 Nper 144
Future value 47,000
Payment -$ 167.63

Changing plans A woman needs $13,500 in 10 years. She would like to make regular annual contributions for the firs
then let the amount grow at compound interest for the next 5 years. What should her contributions be? Assume 9%,
compounded annually.

Rate 9%
nper 5
Payments -$ 2,255.75
Future value -$ 80,793.59
Future value 13,500 10 years

Buying office machines A company’s new corporate headquarters will be completed in 2,5 years. At that time, $750,
needed for office equipment. How much should be invested monthly to fund that expense? Assume 9.75% interest,
compounded monthly.

Rate
nper
Future value
Payments
ach month in an account paying 6% annual

rement account have earned 6.5% annual

s account now?

—$25 each month for 11 years. The money has

the account?

to fund a $10,000 obligation in 20 years?(Hint:

nual interest, compounded monthly

ayment of $47,000, which the owner is scheduled

yment to eliminate the balloon payment? His
ular annual contributions for the first 5 years and
ld her contributions be? Assume 9%,

eted in 2,5 years. At that time, $750,000 will be

at expense? Assume 9.75% interest,
Mathematics of Finance Workshop
9.3 Present Value of an Annuity; Amortization

Applications 9.3
Find the periodic payment required to repay a loan with the given terms. $25,000 repaid over 15 years, with monthly p
a 12% annual rate

Rate 0.95%
Nper 180
present value=loan 25000
Payment -$ 290.25

Funding a lottery To fund Jamie’s lottery winnings of $15,000 per month for the next 20 years, the lottery commission ne
a single deposit now. Assuming 9.2% compounded monthly, what should the deposit be?

Rate 0.77%
Nper 240
Payment 15,000
present value=one payment -$ 1,643,603.78

Buying a car The Jepsens are buying a $21,700 car and financing it over the next 4 years. They secure an 8.4% loan. What
monthly payments be?

Rate 0.006744131841
Nper 48
present value=loan $ 15,716.02
Payment -$ 384.36

Choosing a mortgage One lender offers two mortgages—a 15-year mortgage at 12%, and a 20-year mortgage at 11%. For
the monthly payment to repay $130,000.

Rate 0.009488792935 0.00873459

Nper 180 240
present value=loan $ 23,750.51 $ 16,124.41
Payment -$ 275.74 -$ 160.78

Comparing annuities Which of these 20-year plans is best, and why? All are at 8% annually. a. $1,000 each year for 10 yea
then let the accumulated amount grow for 10 years b. $500 each year for 20 years c. Do nothing for 10 years, and then co
$2,000 each year for 10 years d. One payment of$8,000 now, and let it grow
Comparing annuities Which of these 20-year plans is best, and why? All are at 8% annually. a. $1,000 each year for 10 yea
then let the accumulated amount grow for 10 years b. $500 each year for 20 years c. Do nothing for 10 years, and then co
$2,000 each year for 10 years d. One payment of$8,000 now, and let it grow

a b
Rate 8% 8%
Nper 10 20
present value=loan
Payment -1000 -500
Future value $ 209,860.49 $ 22,880.98
Changing the payment A woman contributed $500 per quarter for the first 10 years of an annuity, but changed to quarte
payments of $1,500 for the last 10 years. Assuming 7,25% annual interest compounded quarterly, what is her accumulate

Rate 0.01875
Nper 40
present value=loan $ 13,982.44
Payment -500
Future value -$ 58,791.96

Changing the rate A woman contributed $150 per month for 10 years to an account that paid 5% for the first 5 years, bu
the last 5 years. How much has she saved?

rate 0.4074%
nper 60
PV -150
vf $10,172.06
rate 0.5262%
nper 60
PV -150
vf $24,487.01
15 years, with monthly pay- ments at

e lottery commission needs to make

cure an 8.4% loan. What will their

ear mortgage at 11%. For each, find

,000 each year for 10 years, and

for 10 years, and then contribute
,000 each year for 10 years, and
for 10 years, and then contribute

c d
8% 8%
10 20
-8000
-2000
$ 28,973.12 $ 37,287.66
y, but changed to quarterly
y, what is her accumulated value?

% for the first 5 years, but 6.5% for