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**Applications of Financial Functions:
**

How much you would need to spend on monthly payments such as mortgage or car payments. How much you would need to save in order to accumulate a specific amount by a certain point in time. How much of a down payment you would need to make, for monthly payments to equal a particular amount. How much you would gain over time on a specific amount of savings.

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PMT Function:

It can be used to calculate the payments for a loan or the future value of an investment.

**Syntax: = PMT ( rate , nper , pv , fv , type )
**

Where,

rate: annual interest rate for the loan. nper: total number of payments to be made on the investment/loan. pv: present value or the amount borrowed or & omitted in case of calculating future value of an investment. fv: value of the investment at the end of the investment period & omitted in case of loan payments. type: indicates when payments are due.

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Example:

Vivek has decided to take out a loan of Rs1000000 from his friendly banker. Lets calculate, how much per month is this going to cost him for 5 years?(interest rate 24%)

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=PMT(D5,F5,H5)

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NPER Function

Returns the number of periods for an investment based on periodic, constant payments and a constant interest rate.

syntax: =NPER(rate, pmt, pv, fv, type)

Pmt: is the payment made each period; it cannot change over the life of the annuity. Typically, pmt contains principal and interest but no other fees or taxes.

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Example:

For a personal loan of 2,50,000. Sai has agreed to pay 10,000 a month and 5 percent annual interest. How long would it take to pay off that loan? Here, amount of the payments is known. number of payments is the result.

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Solution:

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FV Function:

Returns the future value of an investment based on periodic, constant payments and a constant interest rate.

Syntax: =FV(rate,nper,pmt,pv,type) The equal sign tells Excel that this is a formula. Within the parentheses are the arguments.

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Example:

Imagine that you're saving for a vacation. You would like to know how much you would have in 12 months, if your account contained rs5000 to start with and you were to deposit rs2000 a month, at an annual interest rate of 6 percent. Given, interest rate of 6 percent annually is divided by 12 to give a monthly rate. number of payments is 12 because you want the result after 12 months. payment amount is your monthly deposit. entered as -2000. present value is the amount already in the account, entered as -5000.

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DB Function:

Returns the depreciation of an asset for a specified period using the fixed-declining balance method.

**Syntax: =DB(cost,salvage,life,period,month)
**

Where, Cost: is the initial cost of the asset. Salvage: is the value at the end of the depreciation. Life: is the number of periods over which the asset is being depreciated. Period: is the period for which you want to calculate the depreciation. Period must use the same units as life. Month: is the number of months in the first year.

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Example:

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NPV Function:

Calculates the net present value of an investment by using a discount rate and a series of future payments (negative values) and income (positive values).

**Syntax: =NPV(rate,value1,value2, ...)
**

Rate is the rate of discount over the length of one period. Value1, value2, ... are 1 to 29 arguments representing the payments and income. Value1, value2, ... must be equally spaced in time and occur at the end of each period. NPV uses the order of value1, value2, ... to interpret the order of cash flows.

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Example:

What is the net present value of periodic payments of 1000, 2000 and 30000 units with a discount rate of 8.75%. At time zero the costs were paid as -4000 units.

=NPV(8.75%,1000,2000,30000)=4,943.21units. The net present value is the returned value minus the initial costs of 4000 units, therefore units. NPV=943.21

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**Other Financial Functions:
**

Almost 54 financial functions are available in MS EXCEL Depreciation Formulas Formulas for Interest, Cash Flow, Investments, Annuities Functions for Coupons Finance Formulas for Securities Formulas for Dollar Price Conversions Treasury Bill Functions

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