FINANCIAL FUNCTIONS

PAYMENT FUNCTIONS

CUMIPMT

The Excel CUMIPMT function calculates the cumulative interest paid on a loan or
investment, between two specified periods.

The syntax of the function is:

CUMIPMT( rate, nper, pv, start_period, end_period, type )

Where the arguments are as follows:

rate - The interest rate, per period.

nper - The number of periods over which the loan or investment is to be

paid.

pv - The present value of the loan/investment.

start_period - The number of the first period over which the interest is to be
calculated (must be an integer between 1 and nper).

end_period - The number of the last period over which the interest is to be
calculated (must be an integer between 1 and nper).

type - An integer (equal to 0 or 1) that specifies whether the payment is

made at the start or the end of the period:
0 - the payment is made at the end of the period;
1 - the payment is made at the start of the period.
Excel Cumipmt Function Example
In the following spreadsheet, the Excel Cumipmt function is used to calculate the
cumulative interest paid during each year of a loan of $50,000 which is to be paid off
over 5 years. Interest is charged at a rate of 5% per year and the payment to the loan is
to be made at the end of each month.
 Formulas: Results:
A B A B
Cumulative interest during each year of a Cumulative interest during each year of a
loan loan
of $50,000 that is to be paid off over 5 of $50,000 that is to be paid off over 5
years, years,
with an interest rate of 5% per year with an interest rate of 5% per year
(payment is (payment is
1 made at the end of each month): 1 made at the end of each month):
Yr1 =CUMIPMT( 5%/12, 60, 50000, 1, 2 Yr1: -$2,294.98
2 : 12, 0 ) 3 Yr2: -$1,833.10
Yr2 =CUMIPMT( 5%/12, 60, 50000, 13, 4 Yr3: -$1,347.59
3 : 24, 0 ) 5 Yr4: -$837.24
Yr3 =CUMIPMT( 5%/12, 60, 50000, 25, 6 Yr5: -$300.79
4 : 36, 0 )
Yr4 =CUMIPMT( 5%/12, 60, 50000, 37,
5 : 48, 0 )
Yr5 =CUMIPMT( 5%/12, 60, 50000, 49,
6 : 60, 0 )

Note that in this example:

• The payments are made monthly, so we have converted the annual interest rate of 5%
into a monthly rate (=5%/12), and the number of years into months (=5*12).

• The calculated interest payments are negative values, as they represent outgoing
payments (for the individual taking out the loan).

IPMT

The Excel IPMT function calculates the interest payment, during a specific period of a
loan or investment that is paid in constant periodic payments, with a constant interest
rate.

The syntax of the function is:

IPMT( rate, per, nper, pv, [fv], [type] )

Where the arguments are as follows:

rate - The interest rate, per period.

 per - The period for which the interest payment is to be calculated (must be an
integer between 1 and nper).

nper - The number of periods over which the loan or investment is to be paid.

pv - The present value of the loan/investment.

[fv] - An optional argument that specifies the future value of the loan/investment,
at the end of nper payments.
If omitted, [fv] takes on the default value of 0.

[type] - An optional argument that defines whether the payment is made at the start
or the end of the period.
This can have the value 0 or 1, meaning:
0 - The payment is made at the end of the period;
1 - The payment is made at the start of the period.
If the [type] argument is omitted, it takes on the default value of 0 (denoting
payments made at the end of the period).
Example 1
In the following spreadsheet, the Excel Ipmt function is used to calculate the interest
payment during months 1 and 2 of a loan of $50,000 which is to be paid off in full after 5
years. Interest is charged at a rate of 5% per year and the payment to the loan is to be
made at the end of each month.

Formula: Result:
A B
A B
Interest payments during months 1
and 2 on a loan of $50,000 that is to Interest payments during months 1
be paid off over 5 years, with an and 2 on a loan of $50,000 that is to
interest rate of 5% per year be paid off over 5 years, with an
1 (payment made at end of each mth): interest rate of 5% per year
1 (payment made at end of each mth):
2 Mth 1: =IPMT( 5%/12, 1, 60, 50000 )
2 Mth 1: -$208.33
3 Mth 2: =IPMT( 5%/12, 2, 60, 50000 )
3 Mth 2: -$205.27

Note that in this example:

• The payments are made monthly, so it has been necessary to convert the annual interest rate of
5% into the monthly rate (=5%/12), and the number of periods from years to months (=5*12).
• As the forecast value is zero, and the payment is to be made at the end of the month,
the [fv] and [type] arguments can be omitted from the above functions.
• The returned interest payments are negative values, as these represent outgoing payments (for
the individual taking out the loan).

Example 2
In the spreadsheet below, the Excel Ipmt function is used to calculate the interest
payment during quarters 1 and 2 of an investment that is required to increase an
investment from $0 to $5,000 over a period of 2 years. Interest is paid at a rate of 3.5%
per year and the payment into the investment is to be made at the beginning of each
quarter.

Formula: Result:
A B
A B
Interest payments during quarters 1 and
2, Interest payments during quarters 1 and
into an investment with current value $0, 2,
which is required to reach $5,000 over 2 into an investment with current value $0,
yrs. The interest rate is 3.5% per year which is required to reach $5,000 over 2
1 (payment made at beginning of each qtr): yrs. The interest rate is 3.5% per year
1 (payment made at beginning of each qtr):
2 Qtr 1: =IPMT( 3.5%/4, 1, 8, 0, 5000, 1 )
2 Qtr 1: $0.00
3 Qtr 2: =IPMT( 3.5%/4, 2, 8, 0, 5000, 1 )
3 Qtr 2: $5.26

Note that, in this example:

• The payments are made quarterly, so the annual interest rate of 3.5% has been converted into
a quarterly rate (3.5%/4), and the number of periods has been converted from years to quarters
(=2*4).

• The [type] argument has been set to 1, to indicate that the payment is to be made at the start of
each quarter.
• The returned interest payment for the first quarter is zero, as the first payment is made at the
start of the quarter.

ISPMT

The Excel ISPMT function calculates the interest paid during a specific period of a loan
or investment.

The syntax of the function is:

 ISPMT( rate, per, nper, pv )
Where the arguments are as follows:

rate - The interest rate, per period.

per - The period for which the interest is to be calculated (must be an integer
between 1 and nper).

nper - The number of periods over which the loan or investment is to be paid.

pv - The present value of the loan/investment.

Cash Flow Sign Convention:

Note that, in line with the general cash flow sign convention, cash outflows are
represented by negative numbers and cash inflows are represented by positive
numbers. This is seen in the example below.

Excel Ispmt Function Example

In the following spreadsheet, the Excel Ispmt function is used to calculate the interest
paid, during months 1 and 2, of a loan of $50,000 which is to be paid off over 5 years.
Interest is charged at a rate of 5% per year.

Formula: Result:
A B A B
Interest payments during months 1 Interest payments during months 1
and 2 on a loan of $50,000 that is to and 2 on a loan of $50,000 that is to
be paid off over 5 years, with an be paid off over 5 years, with an
1 interest rate of 5% per year: 1 interest rate of 5% per year:
2 Mth 1: =ISPMT( 5%/12, 1, 60, 50000 ) 2 Mth 1: -$204.86
3 Mth 2: =ISPMT( 5%/12, 2, 60, 50000 ) 3 Mth 2: -$201.39
Note that in this example:

• The payments are made monthly, so we have to converted the annual interest rate of
5% into the monthly rate (=5%/12), and the number of periods from years to months
(=5*12).

• The returned interest values are negative, as these represent outgoing payments (for
the individual taking out the loan).

PMT
Function Description
The Excel PMT function calculates the constant periodic payment required to pay off (or
partially pay off) a loan or investment, with a constant interest rate, over a specified
period.

The syntax of the function is:

PMT( rate, nper, pv, [fv], [type] )

Where the arguments are as follows:

rate - The interest rate, per period.

nper - The number of periods over which the loan or investment is to be paid.

pv - The present value of the loan/investment.

[fv] - An optional argument that specifies the future value of the loan/investment,
at the end of nper payments.
If omitted, [fv] has the default value of 0.

[type] - An optional argument that defines whether the payment is made at the start
or the end of the period.
This can have the value 0 or 1, meaning:
0 - the payment is made at the end of the period;
1 - the payment is made at the beginning of the period.
If the [type] argument is omitted, it takes on the default value of 0 (denoting
payments made at the end of the period).

Example 1
In the following spreadsheet, the Excel Pmt function is used to calculate the monthly
payments on a loan of $50,000 which is to be paid off in full after 5 years. Interest is
charged at a rate of 5% per year and the payment to the loan is to be made at the end
of each month.

Formula: Result:
A
A
Monthly payments on a loan of
1 $50,000 that is to be paid off in 1 Monthly payments on a loan of
full over 5 years, with an interest $50,000 that is to be paid off in
 rate of 5% per year (payment full over 5 years, with an interest
made at end of each mth): rate of 5% per year (payment
made at end of each mth):
2 =PMT( 5%/12, 60, 50000 )
2 -943.56

Note that in this example:

• The payments are made monthly, so the annual interest rate of 5% has been converted
into the monthly rate (=5%/12), and the period of 5 years is expressed in months
(=5*12).

• As the future value is zero, and the payment is to be made at the end of the month,
the [fv] and [type] arguments can be omitted from the above function.
• The value returned from the function is negative, as this represents an outgoing
payment (for the individual taking out the loan).

Example 2
In the spreadsheet below, the Excel Pmt function is used to calculate the quarterly
payments required to increase an investment from $0 to $5,000 over a period of 2
years. Interest is paid at a rate of 3.5% per year and the payment into the investment is
to be made at the beginning of each quarter.

Formula:
A
Quarterly payments into an investment
with current value $0, which is
required to reach $5,000 over 2 yrs.
The interest rate is 3.5% per year
1 (payment made at start of each qtr):
2 =PMT( 3.5%/4, 8, 0, 5000, 1 )
Result:
A
Quarterly payments into an investment
with current value $0, which is
required to reach $5,000 over 2 yrs.
The interest rate is 3.5% per year
1 (payment made at start of each qtr):
2 -600.85

Note that, in this example:

• The payments into the investment are made quarterly, so the annual interest rate of 3.5% is
converted into a quarterly rate (3.5%/4), and the number of years is converted into quarters
(=2*4).

• The [type] argument has been set to 1, to indicate that the payment into the investment is to be
made at the beginning of each quarter.
• The value returned from the function is negative, as this represents an outgoing payment.

PPMT

The Excel PPMT function calculates the payment on the principal, during a specific
period of a loan or investment that is paid in constant periodic payments, with a
constant interest rate.

The syntax of the function is:

PPMT( rate, per, nper, pv, [fv], [type] )

Where the arguments are as follows:

rate - The interest rate, per period.

per - The period for which the payment on the principal is to be calculated (must be an
integer between 1 and nper).

nper - The number of periods over which the loan or investment is to be paid.

pv - The present value of the loan/investment.

[fv] - An optional argument that specifies the future value of the loan/investment,
at the end of nper payments.
If omitted, [fv] takes on the default value of 0.

[type] - An optional argument that specifies whether the payment is made at the
start or the end of the period.
This can have the value 0 or 1, meaning:
0 - The payment is made at the end of the period;
1 - The payment is made at the start of the period.
If the [type] argument is omitted, it takes on the default value of 0 (denoting
payments made at the end of the period).

Cash Flow Sign Convention:

 Note that, in line with the general cash flow sign convention, cash outflows are represented by
negative numbers and cash inflows are represented by positive numbers. This is seen in the
examples below.

Excel Ppmt Function Examples

Example 1
The following spreadsheet shows the Excel Ppmt function used to calculate payment on
the principal, in months 1 and 2 on a loan of $50,000 which is to be paid off in full after 5
years. Interest is charged at a rate of 5% per year and the payment to the loan is to be
made at the end of each month.

Formula: Result:
A B
A B
Payments on the principal, during
mths 1 and 2, on a loan of $50,000 that Payments on the principal, during
is to be paid off in full over 5 years, mths 1 and 2, on a loan of $50,000 that
with an interest rate of 5% per year is to be paid off in full over 5 years,
1 (payment made at end of each mth): with an interest rate of 5% per year
1 (payment made at end of each mth):
2 Mth 1: =PPMT( 5%/12, 1, 60, 50000 )
2 Mth 1: -$735.23
3 Mth 2: =PPMT( 5%/12, 2, 60, 50000 )
3 Mth 2: -$738.29

Note that in this example:

• The payments are made monthly, so it has been necessary to convert the annual interest rate of
5% into the monthly rate (=5%/12), and the number of periods from years into months (=5*12).

• As the forecast value is zero, and the payment is to be made at the end of the month,
the [fv] and [type] arguments can be omitted from the above functions.
• The returned payments are negative values, as these represent outgoing payments (for the
individual taking out the loan).

Example 2
In the spreadsheet below, the Excel Ppmt function is used to calculate the payment on
the principal, during quarters 1 and 2 of an investment that is required to increase an
investment from $0 to $5,000 over a period of 2 years. Interest is paid at a rate of 3.5%
per year and the payment into the investment is to be made at the beginning of each
quarter.
 Formula: Result:
A B
A B
Payments on the principal, during
qtrs 1 and 2, into an investment Payments on the principal, during
with current value $0, which is qtrs 1 and 2, into an investment
required to reach $5,000 over 2 yrs. with current value $0, which is
The interest rate is 3.5% per year required to reach $5,000 over 2 yrs.
1 (payment made at beginning of each qtr): The interest rate is 3.5% per year
1 (payment made at beginning of each qtr):
2 Qtr 1: =PPMT( 3.5%/4, 1, 8, 0, 5000, 1 )
2 Qtr 1: -$600.85
3 Qtr 2: =PPMT( 3.5%/4, 2, 8, 0, 5000, 1 )
3 Qtr 2: -$606.11

Note that, in this example:

• The payments are made quarterly, so the annual interest rate of 3.5% has been converted into
a quarterly rate (=3.5%/4), and the number of periods has been converted from years to
quarters (=2*4).

• The [type] argument has been set to 1, to indicate that the payment is to be made at
the beginning of each quarter.
• The returned payments are negative values, as these represent outgoing payments (for the
investor).

INVESTMENT FUNCTIONS

FV

he Excel FV function calculates the Future Value of an investment with periodic

constant payments and a constant interest rate.
The syntax of the function is:

FV( rate, nper, [pmt], [pv], [type] )

Where the arguments are as follows:

rate - The interest rate, per period.

nper - The number of periods for the lifetime of the annuity.

[pmt] - An optional argument that specifies the payment per period.
(Note that if the [pmt] argument is omitted it uses the default value 0).

[pv] - An optional argument that specifies the present value of the annuity - i.e. the
amount that a series of future payments is worth now.
(Note that if the [pv] argument is omitted, it takes on the default value 0).

[type] - An optional argument that defines whether the payment is made at the start
or the end of the period.
The [type] argument can have the value 0 or 1, meaning:
0 - the payment is made at the end of the period;
1 - the payment is made at the start of the period.
If the [type] argument is omitted, it takes on the default value of 0 (denoting
payments made at the end of the period).

Cash Flow Sign Convention:

Note that, in line with the general cash flow sign convention, cash outflows are represented by
negative numbers and cash inflows are represented by positive numbers. This is seen in the
examples below.

Excel FV Function Examples

The following spreadsheets show the Excel FV function, used to calculate the future
value of two different investments.

Example 1
In the following spreadsheet, the Excel Fv function is used to calculate the future value
of an investment of $1,000 per month for a period of 5 years. The present value is 0, the
interest rate is 5% per year and the payments are made at the end of each month.

Result:
Formula:
A A

Future value of an investment Future value of an investment

1 of $1,000 per month over 5 1 of $1,000 per month over 5
years, with a present value of years, with a present value of
 $0, and an interest rate of 5% $0, and an interest rate of 5%
per year (payment made at per year (payment made at
end of each mth): end of each mth):

2 =FV( 5%/12, 60, -1000 ) 2 $68,006.08

Note that, in this example:

• The payments are made monthly, so it is necessary to supply the annual interest rate of 5%
as a monthly interest rate (=5%/12), and to express the 5-year period as a number of months
(=60).

• As the present value is zero, and the payment is to be made at the end of the month,
the [pv] and [type] arguments can be omitted from the above function.
• As the monthly payments are paid out, they are input to the function as negative values.

Example 2
In the example below, the Excel Fv function is used to calculate the future value of an
investment of $2,000 per quarter for a period of 4 years. The interest is 10% per year
and each payment is made at the start of the quarter.

Formula:
A
Future value of an investment
of $2,000 per quarter over 4
years, with a present value of
$0, and an interest rate of 10%
per year (payment made at
1 start of each qtr):
2 =FV( 10%/4, 16, -2000, 0, 1 )
Result:
A
Future value of an investment
of $2,000 per quarter over 4
years, with a present value of
$0, and an interest rate of 10%
per year (payment made at
1 start of each qtr):
2 $39,729.46

Note that, in this example:

• The payments are made quarterly, so the annual interest rate of 10% has been converted into
a monthly rate (=10%/4), and the 4-year period has been input as a number of quarters (=16).

• Again the quarterly payments are paid out, and so are input to the function
as negative values.

FVSCHEDULE FUNCTION
The Excel FVSchedule function calculates the Future Value of an investment with a
variable interest rate.
The syntax of the function is:
FVSCHEDULE( principal, schedule )

where the arguments are as follows:

principal - The present value of the investment.

schedule - An array of values that provides the schedule of interest rates to be

applied to the principal.
If provided as a range of cells, these may contain numeric values or be empty
(empty cells denote a zero interest rate).

Excel Fvschedule Function Example

In cell B1 of the spreadsheet below, the Excel Fvschedule function is used to calculate
the future value of an investment of $10,000, over 5 years. The investment earns
interest of 5% during the first two years and 3.5% during the 3rd, 4th and 5th years.

Formula: Result:
A B
A B
1 5.0% =FVSCHEDULE( 10000, A1:A5 )
1 5.0% $12,223.61
2 5.0%
2 5.0%
3 3.5%
3 3.5%
4 3.5%
4 3.5%
5 3.5%
5 3.5%

NPV FUNCTION

The Excel NPV function calculates the Net Present Value of an investment, based on a
supplied discount rate, and a series of future payments and income.
The syntax of the function is:
 NPV( rate, value1, [value2], [value3], ... )

where the arguments are as follows:

rate - The discount rate over one period.

value1, [value2], ... - Numeric values, representing a series of regular payments and
income, where:
• Negative values are treated as outgoing payments;
• Positive values are treated as income.

Note that:

• If the value arguments are supplied individually, numbers, blank cells, logical values and text
representations of numbers are interpreted as numeric values, while other text values and error
values are ignored;
• If the value arguments are supplied as an array, all non-numbers in the array are ignored.
• In the latest versions of Excel, you can provide up to 254 value arguments to the NPV function,
but in Excel 2003, the function can only accept up to 29 values.

NPV Function Example

Example 1
A B

1 2% - Annual discount rate

2 -5000 - Initial investment cost after 1 year

3 800 - Return from year 1

4 950 - Return from year 2

5 1080 - Return from year 3

6 1220 - Return from year 4

7 1500 - Return from year 5

8
 9 Net Present Value:

10 =NPV( A1, A2:A7 )

The spreadsheet on the right shows a simple example of the NPV function.
The rate and value arguments that are supplied to the function are stored in cells A1-A7
of the spreadsheet and the NPV function is entered into cell B10.
This function gives the result 196.88.
Note that, in this example, the initial investment of $5,000 (shown in cell A2), is made at
the end of the first period. Therefore, this value is included as the first value1 argument
to the NPV function.

NPV Function Example 2

A B

1 5% - Annual discount rate

2 -10000 - Initial investment cost at start of year 1

3 2000 - Return from year 1

4 2400 - Return from year 2

5 2900 - Return from year 3

6 3500 - Return from year 4

7 4100 - Return from year 5

9 Net Present Value:

10 =NPV( A1, A3:A7 ) + A2

The spreadsheet on the right shows a further example of the NPV function in which the
first payment is made at the start of the first period.
Again, the rate and value arguments of the investment are stored in cells A1-A7 of the
spreadsheet and the NPV function is entered into cell B10.
This function gives the result 2,678.68.
Note that, as the initial investment of $10,000 (shown in cell A2), is made at the start of
the first period, this value is not included in the arguments to the NPV function. Instead
it is added on afterwards.

PV FUNCTION

The Excel PV function calculates the Present Value of an investment, based on a series
of future payments.
The syntax of the function is:
PV( rate, nper, [pmt], [fv], [type] )

Where the arguments are as follows:

rate - The interest rate, per period.

nper - The number of periods for the lifetime of the annuity or investment.

[pmt] - An optional argument that specifies the payment per period.

If the [pmt] argument is omitted, it takes on the default value 0.

[fv] - An optional argument that specifies the future value of the annuity, at the
end of nper payments.
If the [fv] argument is omitted, it takes on the default value 0.

[type] - An optional argument that defines whether the payment is made at the start
or the end of the period.
The [type] argument can have the value 0 or 1, meaning:
0 - the payment is made at the end of the period;
1 - the payment is made at the start of the period.
If the [type] argument is omitted, it takes on the default value of 0 (denoting
payments made at the end of the period).

Cash Flow Sign Convention:

Note that, in line with the general cash flow sign convention, cash outflows are represented by
negative numbers and cash inflows are represented by positive numbers. This is seen in the
examples below.
 Excel Pv Function Examples
Example 1
In the following spreadsheet, the Excel Pv function is used to calculate the present
value of an annuity that pays $1,000 per month for a period of 5 years. The interest is
5% per year and each payment is made at the end of the month.

Formulas:
A
Present value of an annuity
with an interest rate of 5%
per year and payments of
$1,000 per month over 5
years (payment made at end
1 of each month):
2 =PV( 5%/12, 60, 1000 )
Results:
A
Present value of an annuity
with an interest rate of 5%
per year and payments of
$1,000 per month over 5
years (payment made at end
1 of each month):
2 -$52,990.71

Note that, in this example:

• As the payments are made monthly, it has been necessary to convert the annual interest rate
of 5% into a monthly rate (=5%/12), and to express the 5-year period as a number of months
(=60);

• As the forecast value is zero, and the payment is to be made at the end of the month,
the [fv] and [type] arguments can be omitted from the above function;
• As the initial investment is paid out, the calculated present value is a negative cash amount.

Example 2
In the example below, the Excel Pv function is used to calculate the present value of an
annuity that pays $2,000 per quarter for a period of 4 years. The interest is 10% per
year and each payment is made at the start of the quarter.

Results:
Formulas:
A A

Present value of an annuity Present value of an annuity

1 with an interest rate of 10% 1 with an interest rate of 10%
per year and payments of per year and payments of
 $2,000 per quarter over 4 $2,000 per quarter over 4
years (payment made at years (payment made at
start of each quarter): start of each quarter):

2 =PV( 10%/4, 16, 2000, 0, 1 ) 2 -$26,762.76

Note that, in this example:

• As the payments are made quarterly, it has been necessary to convert the annual interest
rate of 10% into a monthly rate (=10%/4), and to express the 4-year period as a number of
quarters (=16);

• Again, as the initial investment is paid out, the calculated present value is negative.

RECEIVED FUNCTION

Function Description
The Excel RECEIVED function calculates the amount received at maturity for a fully
invested security.

The syntax of the function is:

RECEIVED( settlement, maturity, investment, discount, [basis] )

where the arguments are:

settlement - The security's settlement date (i.e. the date that the coupon is
purchased).

maturity - The security's maturity date (i.e. the date that the coupon expires).

investment - The initial amount invested into the security.

discount - The security's discount rate.

[basis] - An optional argument which defines the day count basis to be used in
the calculation.
Possible values of the [basis] argument, and their meanings are:
[basis] Day Count Basis
0 (or omitted) US (NASD) 30/360
 1 actual/actual
2 actual/360
3 actual/365
4 European 30/360
The financial day count basis rules are explained further on
the Wikipedia Day Count Convention page

Note also, that Microsoft recommends that the settlement and maturity arguments
should be entered into the Received function as either:
• References to cells containing dates
or
• Dates returned from formulas.

Warning: If you attempt to input the date arguments as text, the interpretion of these
can differ, depending to the date system and date interpretation settings on your
computer.

Received Function Example

Cell A3 of the following spreadsheet shows the Excel Received function, used to
calculate amount received at maturity, on an investment of $1,000, which was used to
purchase a security on 01-Apr-2011. The security matured on 31-Mar-2016, with a
discount rate of 4.5%. The US (NASD) 30/360 day count basis is used:

A B
1 Settlement Date: 01-Apr-2011
2 Maturity Date: 31-Mar-2016
3 =RECEIVED( B1, B2, 1000, 4.5% )
The formula in the above spreadsheet returns the value $1,290.32.
Note that, in the above example:

• As recommended, the settlement and maturity dates are supplied to the function as
references to dates stored in cells B1 and B2;
• The discount argument is supplied to the function as a percentage value, 4.5%. This
could also have been provided as the decimal value 0.045;
• The [basis] argument is omitted and so takes on the default value 0 (and therefore
uses the US (NASD) 30/360 basis).

XNPV FUNCTION
The Excel XNPV function calculates the Net Present Value for a schedule of cash flows
that is not necessarily periodic.
The syntax of the function is:

XNPV( rate, values, dates )

Where the arguments are:

rate - The discount rate to apply to the cash flows.

values - An array of numeric values, representing payments and income, where:

• Negative values are treated as outgoing payments;
• Positive values are treated as income.
The first payment is optional and denotes a payment at the beginning of
the investment.

dates - An array of dates corresponding to the array of payments. This array must
be the same length as the supplied values array.

XNPV Function Example

A B C
1 5% - Discount rate
2 Jan-01-2016 -$10,000 - Initial investment cost
3 Feb-01-2016 $2,000 - Return from year 1
4 May-01-2016 $2,400 - Return from year 2
5 Jul-01-2016 $2,900 - Return from year 3
6 Nov-01-2016 $3,500 - Return from year 4
7 Jan-01-2017 $4,100 - Return from year 5
8
9 Net Present Value:
10 =XNPV( B1, B2:B7, A2:A7 )
In the spreadsheet on the right the Xnpv function is used to calculate the net present
value of a series of cashflows.
The discounted rate is shown in cell B1 of the spreadsheet, the dates of the returns are
stored in cells A2-A7 and the values of the returns are stored in cells B2-B7.

The Xnpv function, as shown in cell C10, is:

=XNPV( B1, B2:B7, A2:A7 )

which gives the result $4,447.94
PRICE FUNCTION

DISC FUNCTION

The Excel DISC function calculates the Discount Rate for a security.
The syntax of the function is:

DISC( settlement, maturity, pr, redemption, [basis] )

Where the arguments are as follows:

settlement - The security's settlement date (i.e. the date that the coupon is purchased).

maturity - The security's maturity date (i.e. the date that the coupon expires).

pr - The security's price per $100 face value.

redemption - The security's redemption value per $100 face value.

[basis] - An optional argument which defines the day count basis to be used in
the calculation. Possible values are:

Basis Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360

3 actual/365

4 European 30/360

The financial day count basis rules are explained further on the Wikipedia
Day Count Convention page
 Note that the settlement and maturity dates should be input to the Disc function as
either:
• References to cells containing dates
or

• Dates returned from formulas.

Warning: If you attempt to input text representations of dates into Excel functions, the
interpretion of these can vary, depending to the date system and date interpretation
settings on your computer.

Disc Function Example

In the following example, the Excel Disc function is used to calculate the discount rate of
a security purchased on 01-Apr-2016, with Maturity date 31-Mar-2021. The price per
$100 face value is $95, the Redemption value is $100, and the US (NASD) 30/360 day
count basis is used:

A B

1 Settlement Date: 01-Apr-2016

2 Maturity Date: 31-Mar-2021

3 =DISC( B1, B2, 95, 100 )

The above function returns the value 0.01.

I.e. the discount rate for a security with the above terms is 1.0%.

PRICE FUNCTION

The Excel Price function calculates the price, per $100 face value of a security that pays
periodic interest.

The syntax of the function is:

PRICE( settlement, maturity, rate, yld, redemption, frequency, [basis] )

Where the arguments are as follows:

settlement - The settlement date of the security (i.e. the date that the coupon is
purchased).
maturity - The maturity date of the security (i.e. the date that the coupon expires).

rate - The security's annual coupon rate.

yld - The annual yield of the security.

redemption - The security's redemption value per $100 face value.

frequency - The number of coupon payments per year. This must be one of the
following:

1 - Annually

2 - Semi-Annually

4 - Quarterly

[basis] - An optional integer argument which specifies the financial day count basis
that is used by the security. Possible values are:

Basis Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360

3 actual/365

4 European 30/360

The financial day count basis rules are explained in detail on the Wikipedia
Day Count Convention page
 Warning: If you enter text representations of dates into Excel functions, the
interpretation of these can vary, depending to the date system and date interpretation
settings on your computer. Therefore, the settlement and maturity dates should be
entered into the Price function as either:
• References to cells containing dates
or

• Dates returned from formulas.

Excel Price Function Example

In the following example, the Excel Price function is used to calculate the price per $100
face value of a security purchased on 01-Apr-2012, with maturity date 31-Mar-2020 and
a rate of 12%. The yield is 10% and the redemption value is $100. Payments are made
semi-annually and the US (NASD) 30/360 day count basis is used:

A B

1 Settlement Date: 01-Apr-2012

2 Maturity Date: 31-Mar-2020

3 =PRICE( B1, B2, 12%, 10%, 100, 2 )

The above function returns the value 110.8344836.

I.e. a security with the above terms would be valued at $110.83.

PRICEDISC FUNCTION

The Excel Pricedisc function calculates the price, per $100 face value of a discounted
security.

The syntax of the function is:

PRICEDISC( settlement, maturity, discount, redemption, [basis] )

Where the arguments are as follows:

 settlement - The settlement date of the security (i.e. the date that the coupon is
purchased).

maturity - The maturity date of the security (i.e. the date that the coupon expires).

discount - The security's percentage discount rate.

redemption - The security's redemption value per $100 face value.

[basis] - An optional integer argument that specifies the financial day count
basis that is used by the security. Possible values are:

Basis Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360

3 actual/365

4 European 30/360

The financial day count basis rules are explained in detail on the Wikipedia
Day Count Convention page

Warning: If you enter text representations of dates into Excel functions, the
interpretation of these can differ, depending to the date system and date interpretation
settings on your computer. Therefore, the settlement and maturity dates should be
entered into the Pricedisc function as either:
• References to cells containing dates
or

• Dates returned from formulas.

Excel Pricedisc Function Example
In the following example, the Excel Pricedisc function is used to calculate the price per
$100 face value of a discounted security purchased on 01-Apr-2017, with maturity date
31-Mar-2021 and a discounted rate of 2.5%. The redemption value is $100 and the US
(NASD) 30/360 day count basis is used:

A B

1 Settlement Date: 01-Apr-2017

2 Maturity Date: 31-Mar-2021

3 =PRICEDISC( B1, B2, 2.5%, 100 )

The above function returns the value 90.00.

I.e. the price of security with the above terms would be $90.00.

PRICEMAT FUNCTION

The Excel Pricemat function calculates the price, per $100 face value of a security that
pays interest at maturity.

The syntax of the function is:

PRICEMAT( settlement, maturity, issue, rate, yld, [basis] )

Where the arguments are as follows:

settlement - The settlement date of the security (i.e. the date that the coupon is
purchased).

maturity - The maturity date of the security (i.e. the date that the coupon expires).

issue - The issue date of the security.

rate - The security's interest rate at the date of issue.

 yld - The security's annual yield.

[basis] - An optional integer argument which specifies the financial day count
basis that is used by the security. Possible values are:

Basis Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360

3 actual/365

4 European 30/360

The financial day count basis rules are explained in detail on the Wikipedia
Day Count Convention page

Note that the date arguments must satisfy the following:

issue < settlement < maturity

Warning: If you supply text representations of dates to Excel functions, the

interpretation of these can vary, depending to the date system and date interpretation
settings on your computer. Therefore, the settlement, maturity and issue arguments
should be entered into the Pricemat function as either:
• References to cells containing dates
or

• Dates returned from formulas.

Excel Pricemat Function Example

 In the following example, the Excel Pricemat function is used to calculate the price per
$100 face value of a security that pays interest at maturity. The security's issue date is
01-Jan-2017, the settlement date is 01-Apr-2017, and the maturity date is 31-Mar-2021.
The rate of interest at issue is 4.5% and the annual yield is 2.5%. The US (NASD)
30/360 day count basis is used:

A B

1 Settlement Date: 01-Apr-2017

2 Maturity Date: 31-Mar-2021

3 Issue Date: 01-Jan-2017

4 =PRICEMAT( B1, B2, B3, 4.5%, 2.5% )

The above Pricemat function returns the value 107.1704545.

I.e. the price of security with the above terms would be $107.17.

TBILLPRICE FUNCTION

The Excel Tbillprice function returns the price, per $100 face value, of a Treasury Bill.

The syntax of the function is:

TBILLPRICE( settlement, maturity, discount )

Where the arguments are as follows:

settlement - The settlement date of the treasury bill (i.e. the date that the bill is
purchased).

maturity - The maturity date of the treasury bill (i.e. the date that the bill expires).

pr - The treasury bill's percentage discount rate.

Note that the supplied maturity date must be greater than, but no more than one year
after the settlement date.
Note also, that these dates should be supplied to the function as either:

• References to cells containing dates

or
• Dates returned from formulas.
Warning: If you attempt to input text representations of dates into Excel functions, the
interpretion of these can differ, depending to the date system and date interpretation
settings on your computer.

Excel Tbillprice Function Example

The following spreadsheet shows the Excel Tbillprice function used to calculate the
price, per $100 face value, of a treasury bill with settlement date 01-Feb-2017, maturity
date 30-Jun-2017 and a discount rate of 2.75%:

A B
1 Settlement Date: 01-Feb-2017
2 Maturity Date: 30-Jun-2017
3 =TBILLPRICE( B1, B2, 2.75% )
This function returns the value 98.86180556.
I.e. a treasury bill with the above terms would be valued at $98.86.

INTEREST RATE FUNCTION

ACCRINT

The Excel Accrint function returns the accrued interest for a security that pays periodic
interest.

The syntax of the function is:

ACCRINT( issue, first_interest, settlement, rate, [par], frequency, [basis], [calc_method] )

Where the arguments are as follows:

issue - The issue date of the security.

first_interest - The security's first interest date.

settlement - The security's settlement date.

rate - The security's annual coupon rate.

 [par] - The security's par value.
If omitted, [par] takes the default value of 1,000.

frequency - The number of coupon payments per year (must be equal to 1, 2 or 4).

[basis] - An optional argument, that specifies the day count basis to be used
in the calculation.
Possible values of [basis] and their meanings are:
[basis] Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360

3 actual/365

4 European 30/360

The financial day count basis rules are explained in detail on

the Wikipedia Day Count Convention page

[calc_method] - An optional logical value that specifies the way to calculate the total
accrued interest when the settlement date is later than
the first_interest date.
This can have the value TRUE or FALSE, meaning:

TRUE - Return the total accrued interest from issue to settlement

FALSE - Return the accrued interest from first_interest to settlement

If omitted, [calc_method] takes the default value of TRUE.

Warning: Microsoft advises that you do not type dates directly into functions, as Excel
may interpret text representations of dates differently, depending on the date
interpretation settings on your computer. Therefore
the issue, first_interest and settlement dates should be input to the Accrint function as
either:
• References to cells containing dates
or
• Dates returned from other functions or formulas.

Accrint Function Examples

The following spreadsheet shows an example of the Excel Accrint function, used to
calculate the accrued interest of a security that pays periodic interest. The security's
issue date is 01-Jan-2012, the first interest date is 01-Apr-2012, the settlement date is
31-Dec-2013 and the annual coupon rate is 8%. The security's par value is $10,000,
payments are made quarterly, and a US (NASD) 30/360 day count basis is used.

A B C D

Accrued interest on a security with an issue date

of 01-Jan-2012, a first interest date of 01-Apr-2012
and a settlement date of 31-Dec-2013.
The annual coupon rate is 8%, the par value of
the security is $10,000 and payments are made
1 issue date: 01-Jan-2012 quarterly, on a US (NASD) 30 / 360 basis:

2 first interest date: 01-Apr-2012 =ACCRINT( B1, B2, B3, 8%, 10000, 4 )

3 settlement date: 31-Dec-2013

The above function gives the result $1,600.

ACCRINTM FUNCTION

Function Description
The Excel Accrintm function returns the accrued interest for a security that pays interest
at maturity.

The syntax of the function is:

ACCRINTM( issue, settlement, rate, [par], [basis] )

Where the arguments are as follows:

issue - The issue date of the security.

 settlement - The security's maturity date.

rate - The security's annual coupon rate.

[par] - The security's par value.

If omitted, [par] takes the default value of 1,000.

[basis] - An optional argument, that specifies the day count basis to be used in
the calculation.
Possible values of [basis] and their meanings are:
[basis] Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360

3 actual/365

4 European 30/360

The financial day count basis rules are explained in detail on

the Wikipedia Day Count Convention page
Warning: Microsoft advises that you do not type dates directly into functions, as Excel
may interpret text representations of dates differently, depending on the date
interpretation settings on your computer. Therefore the issue and settlement dates
should be input to the Accrintm function as either:
• References to cells containing dates
or

• Dates returned from other functions or formulas.

Accrint Function Examples

The following spreadsheet shows an example of the Excel Accrintm function, used to
calculate the accrued interest of a security that pays interest at maturity. The security
has an issue date of 01-Jan-2012 and a settlement date of 31-Dec-2012. The annual
coupon rate is 8% and the par value of the security is $10,000. The US (NASD) 30/360
day count basis is used.

A B C D

Accrued interest on a security with an issue date

of 01-Jan-2012 and a settlement date of 31-Dec-2012.
The annual coupon rate is 8%, the par value of
the security is $10,000 and a US (NASD) 30 / 360
1 issue date: 01-Jan-2012 day count basis is used:

2 settlement date: 31-Dec-2012 =ACCRINTM( B1, B2, 8%, 10000 )

The above function gives the result $800

INTRATE

Function Description
The Excel Intrate function calculates the interest rate for a fully invested security.

The syntax of the function is:

INTRATE( settlement, maturity, investment, redemption, [basis] )

where the arguments are as follows:

settlement - The security's settlement date (i.e. the date that the coupon is purchased).

maturity - The security's maturity date (i.e. the date that the coupon expires).

investment - The initial amount invested into the security.

redemption - The amount to be received at maturity.

[basis] - An optional argument, that specifies the day count basis to be used in
the calculation.
Possible values of [basis] and their meanings are:
 [basis] Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360

3 actual/365

4 European 30/360

The financial day count basis rules are explained in more detail on
the Wikipedia Day Count Convention page

Warning: Microsoft advises that you do not type dates directly into functions, as Excel
may interpret text representations of dates differently, depending on the date
interpretation settings on your computer. Therefore the settlement and maturity dates
should be input to the Intrate function as either:
• References to cells containing dates
or

• Dates returned from other functions or formulas.

Intrate Function Example

In the spreadsheet below, the Excel Intrate function is used to calculate the interest rate
of an investment of $1,000, which was used to purchase a security on 01-Apr-2005. The
security matured on 31-Mar-2010, with a redemption value of $2,125 and the US
(NASD) 30/360 day count basis is used:

A B C D

Interest rate of a security with value $1,000,

invested on 01-Apr-2005, which matures on
31-Mar-2010, with a redemption value of $2,125.
1 settlement date: 01-Apr-2005 The US (NASD) 30/360 day count basis is used:
2 maturity date: 31-Mar-2010 =INTRATE( B1, B2, 1000, 2125 )

The formula in cell D2 of the above spreadsheet returns the value 0.225, or 22.5%.

RATE FUNCTION

The Excel Rate function calculates the interest rate required to pay off a specified
amount of a loan, or to reach a target amount on an investment, over a given period.

The syntax of the function is:

RATE( nper, pmt, pv, [fv], [type], [guess] )

Where the arguments are as follows:

nper - The number of periods over which the loan or investment is to be paid.

pmt - The (fixed) payment amount per period.

pv - The present value of the loan / investment.

[fv] - An optional argument that specifies the future value of the loan /
investment, at the end of nper payments.
If omitted, [fv] takes on the default value of 0.

[type] - An optional argument that defines whether the payment is made at the
start or the end of the period.
The [type] argument can have the value 0 or 1, meaning:
0 - the payment is made at the end of the period;
1 - the payment is made at the start of the period.
If the [type] argument is omitted, it takes on the default value of 0 (denoting
payments made at the end of the period).

[guess] - An initial estimate at what the rate will be.

If this argument is omitted, it will take on the default value of 10% (=0.1).
(Note this is only a value for Excel to start off working with - Excel then
uses an iterative procedure to converge to the correct rate).
 Cash Flow Sign Convention:
Note that, in line with the general cash flow sign convention, cash outflows are represented by
negative numbers and cash inflows are represented by positive numbers. This is seen in the
examples below.

Rate Function Examples

Example 1
In the following spreadsheet, the Excel Rate function is used to calculate the interest
rate, with fixed payments of $1,000 per month, to pay off in full, a loan of $50,000 over a
period of 5 years. The payments are to be made at the end of each month.

Formula:
A
Monthly interest rate to clear a
loan of $50,000 with payments of
$1,000 per mth over 5 yrs (payments
1 made at end of each mth):
2 =RATE( 60, -1000, 50000 )
3 Yearly Interest Rate:
4 =12*A2
Result:
A
Monthly interest rate to clear a
loan of $50,000 with payments of
$1,000 per mth over 5 yrs (payments
1 made at end of each mth):
2 0.62%
3 Yearly Interest Rate:
4 7.42%

In the above example:

• As the payments are made on a monthly basis, the number of periods must be expressed in
months (5 years = 60 months).

• As the payments are outgoing, the pmt argument is a negative value.

• The returned interest rate is a monthly rate. This can be converted to an annual interest rate by
multiplying by 12 (as shown in cell A4).
 Example 2
In the following spreadsheet, the Excel Rate function is used to calculate the interest
rate required to save $20,000, over 2 years, with a starting value of zero, and monthly
savings of $800. The payments are to be made at the start of each month.

Formula: Result:
A
A
Monthly interest rate required to save
$20,000 over 2 yrs, with an investment Monthly interest rate required to save
of $800 per mth (payments made at $20,000 over 2 yrs, with an investment
1 start of each mth): of $800 per mth (payments made at
1 start of each mth):
2 =RATE( 24, -800, 0, 20000, 1 )
2 0.33%
3 Yearly Interest Rate:
3 Yearly Interest Rate:
4 =12*A2
4 3.90%

In the above example:

• The payments are made on a monthly basis, so the number of periods is expressed in months
(2 yrs = 24 mths).

• The payment is input as a negative value to show that this is an outgoing payment.
• The returned interest rate is a monthly rate, which can be converted to a yearly interest rate by
multiplying by 12 (see cell A4).

RRI FUNCTION

Function Description
The Excel RRI function calculates the equivalent interest rate for an investment with
specified present value, future value and duration.

Note: the RRI function was introduced in Excel 2013 and so is not available in earlier
versions of Excel.
The syntax of the function is:

RRI( nper, pv, fv )

Where the arguments are as follows:

nper - The number of periods over which the investment is made.

pv - The present value of the investment.

fv - The future value of the investment.

RRI Function Example

The following spreadsheet shows the Excel RRI function used to calculate the interest
rate required for an investment of $10,000, to reach a value of $15,000 over 10 periods.

Formulas:
A
Interest rate for an investment
of $10,000 to reach a value of
1 $15,000 over 10 periods:
2 =RRI( 10, 10000, 15000 )
Results:
A
Interest rate for an investment
of $10,000 to reach a value of
1 $15,000 over 10 periods:
2 4.14%

The above formula returns the value 0.041379744, or 4.14%.

OTHER FUNCTIONS RELATED TO INVESTMENT

NPER FUNCTION

The Excel NPER function calculates the number of periods required to pay off a loan,
for a constant periodic payment and a constant interest rate.

The syntax of the function is:

NPER( rate, pmt, pv, [fv], [type] )

Where the arguments are as follows:

rate - The interest rate, per period.

pmt - The amount paid per period.

pv - The present value of the loan.

[fv] - An optional argument that specifies the future value of the loan, after the
final payment.
If omitted, [fv] takes on the default value of 0.

[type] - An optional argument that defines whether the payment is made at the start
or the end of the period.
The [type] argument can have the value 0 or 1, meaning:
0 - the payment is made at the end of the period;
1 - the payment is made at the beginning of the period.
If the [type] argument is omitted, it takes on the default value of 0 (denoting
payments made at the end of the period).

Cash Flow Sign Convention:

Note that, in line with the general cash flow sign convention, outgoing cash flows are
represented by negative numbers and incoming cash flows are represented by positive
numbers. This is seen in the examples below.

Nper Function Examples

Example 1
In the following spreadsheet, the Excel Nper function is used to calculate the number of
years required to pay off in full, a loan of $50,000 at a rate of $6,000 per year. Interest is
charged at a rate of 4% per year, and the payment to the loan is to be made at the end
of each year.

Result:
Formula:
A A

Number years required to Number years required to

1 pay off a loan of $50,000 with 1 pay off a loan of $50,000 with
an interest rate of 4% per year an interest rate of 4% per year
 and payments of $6000 per and payments of $6000 per
year (payment made at end year (payment made at end
of each yr): of each yr):

2 =NPER( 4%, -6000, 50000 ) 2 10.33803507

Note that in this example:

• The payment for the loan is input as a negative value, as this represents an outgoing payment
(for the individual taking out the loan).

• As the future value is zero, and the payment is to be made at the end of each year,
the [fv] and [type] arguments can be omitted from the function call.

Example 2
In the example below, the Excel Nper function is used to calculate the number
of quarterly payments of $2,000 that are required to reduce a loan of $60,000 to
$30,000. Interest is charged at a stated rate of 6% per year and the payment to the loan
is to be made at the beginning of each quarter.
Formula: Result:
A
A
Number of quarterly payments of
$2,000 that are required to reduce Number of quarterly payments of
a loan of $60,000 to $30,000, with an $2,000 that are required to reduce
interest rate of 6% per year (payment a loan of $60,000 to $30,000, with an
1 made at beginning of each quarter): interest rate of 6% per year (payment
1 made at beginning of each quarter):
2 =NPER( 6%/4, -2000, 60000, 30000, 1 )
2 52.79477371

Note that, in this example:

• The payment for the loan is input as a negative value, as this represents an outgoing payment
(for the individual taking out the loan).

• The payments are made quarterly, so the annual interest rate of 6% is converted into a quarterly
rate (6%/4).

• The [type] argument has been set to 1, to indicate that the payment is to be made at
the beginning of each quarter.
• The value returned from the Nper function is in quarters - i.e. the result is 52.8 quarters = 13.2
years.

YIELD FUNCTION
The Excel YIELD function calculates the Yield of a security that pays periodic interest.
The syntax of the function is:

YIELD( settlement, maturity, rate, pr, redemption, frequency, [basis] )

Where the arguments are as follows:

settlement - The settlement date of the security (i.e. the date that the coupon is
purchased).

maturity - The maturity date of the security (i.e. the date that the coupon expires).

rate - The security's annual coupon rate.

pr - The security's price per $100 face value.

redemption - The security's redemption value per $100 face value.

frequency - The number of coupon payments per year. This must be one of the
following:
1 - Annually

2 - Semi-Annually

4 - Quarterly

[basis] - An optional integer argument which specifies the financial day count
basis that is used by the security. Possible values are:
[basis] Day Count Basis

0 (or omitted) US (NASD) 30/360

1 actual/actual

2 actual/360
 3 actual/365

4 European 30/360

For a detailed explanation of the financial day count basis rules, see
the Wikipedia Day Count Convention page.

Note that the settlement and maturity dates should be supplied to the Yield function as
either:
• References to cells containing dates
or

• Dates returned from formulas.

Warning: If you attempt to enter text representations of dates into Excel functions,
these can be interpreted differently, depending on the date system and date
interpretation settings on your computer.

Excel Yield Function Example

The following example shows the Excel Yield function used to calculate the yield on a
coupon purchased on 01-Jan-2010, with Maturity date 30-Jun-2015 and a rate of 10%.
The price per $100 face value is $101 and the redemption value is $100. Payments are
made quarterly and the US (NASD) 30/360 day count basis is used:

A B

1 Settlement Date: 01-Jan-2010

2 Maturity Date: 30-Jun-2015

3 =YIELD( B1, B2, 10%, 101, 100, 4 )

The above function calculates the yield to be 9.76%.

Note that, in the above example:

• The [basis] argument has been omitted, so the default US (NASD) 30/360 day method is
used;
• As recommended, the date arguments have been input as references to cells containing
dates.

IRR FUNCTION

The Excel IRR function returns the Internal Rate of Return for a supplied series of
periodic cash flows (i.e. an initial investment value and a series of net income values).

The syntax of the function is:

IRR( values, [guess] )

Where the arguments are as follows:

values - An array of values (or a reference to a range of cells containing values)

representing the series of cash flows (investment and net income values).
This must include at least one negative value (representing outgoing
payment) and at least one positive value (representing income).

[guess] - An initial guess at what the IRR might be. This is an optional argument,
which, if omitted, takes on the default value of 0.1 (=10%).
(Note: This is only a value for Excel to start off working with - Excel then
uses an iterative procedure to converge to the IRR).

Irr Function Example

In the spreadsheet below, an initial investment of $100 is shown in cell B1 and the net
income over the next 5 years is shown in cells B2-B6.

The IRR function in cell C2 shows the calculation of the Internal Rate of Return after 3
years and the function in cell C4 shows the Internal Rate of Return after 5 years.

Formula: Result:
A B C
A B C
Initial - IRR after 3
Initial - IRR after 3
1 Investment: $100.00 yrs:
1 Investment: $100.00 yrs:
2 Year 1 Income: $20.00 =IRR( B1:B4 )
 IRR after 5 2 Year 1 Income: $20.00 -14%
3 Year 2 Income: $24.00 yrs:
IRR after 5
4 Year 3 Income: $28.80 =IRR( B1:B6 ) 3 Year 2 Income: $24.00 yrs:

5 Year 4 Income: $34.56 4 Year 3 Income: $28.80 13%

6 Year 5 Income: $41.47 5 Year 4 Income: $34.56

6 Year 5 Income: $41.47

Note that, in the above example, the initial investment is a negative value, as this is an
outgoing payment, and the income payments are represented by positive values.