Comments on: Excel Tutorial: Financial functions http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/ Civil Engineer, CAD Geek, podcast junky and amateur photographer Mon, 05 Sep 2011 21:06:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: cdeeley http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-1028 cdeeley Wed, 11 Mar 2009 11:45:48 +0000 http://madmarvonline.com/blog/?p=6#comment-1028 Excel uses Newton's Method to calculate the YTM. But how does it arrive at a first approximation before applying Newton's Method? Excel uses Newton's Method to calculate the YTM. But how does it arrive at a first approximation before applying Newton's Method?

]]> By: cdeeley http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-1012 cdeeley Wed, 11 Mar 2009 04:45:48 +0000 http://madmarvonline.com/blog/?p=6#comment-1012 Excel uses Newton's Method to calculate the YTM. But how does it arrive at a first approximation before applying Newton's Method? Excel uses Newton's Method to calculate the YTM. But how does it arrive at a first approximation before applying Newton's Method?

]]> By: madmarv http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-883 madmarv Wed, 02 Jul 2008 07:00:19 +0000 http://madmarvonline.com/blog/?p=6#comment-883 The result looks correct, given the data that was entered. For a reality check, I took a simple sum of all cash flows and got -6141.37. So, it looks like your portfolio generated about 6,000 in profit while the account balance was typically around the 5,000 level. In that context, the rate of return is indeed greater than 120%. Therefore, I would guess that the last entry on the list was a mistake of some sort. Either a typo or a problem in your methodolgy. But if your account started the year at 4237.68 and ended the year at 10,426.06, then it was a really good year for you. The result looks correct, given the data that was entered. For a reality check, I took a simple sum of all cash flows and got -6141.37. So, it looks like your portfolio generated about 6,000 in profit while the account balance was typically around the 5,000 level. In that context, the rate of return is indeed greater than 120%.

Therefore, I would guess that the last entry on the list was a mistake of some sort. Either a typo or a problem in your methodolgy. But if your account started the year at 4237.68 and ended the year at 10,426.06, then it was a really good year for you.

]]> By: Krys http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-882 Krys Wed, 02 Jul 2008 03:25:26 +0000 http://madmarvonline.com/blog/?p=6#comment-882 I don't know if this site is still active, but if you could help me with my portfolio calculations it would be GREATLY appreciated. Basically the XIRR function seems to work most of the time, but for some reason it's giving me a bogus result for last year. I know it's probably due somehow to too many sign changes, deposits, dividends, withdrawals etc... here are the cash flows: 1/1/07 4237.68 1/4/07 2.16 1/31/07 0.04 2/15/07 10.23 2/28/07 0.04 3/7/07 1500 3/15/07 -1495.28 3/30/07 1486.59 3/30/07 2.16 3/31/07 1.14 4/30/07 2.84 5/15/07 11.55 5/16/07 -1500 5/31/07 0.33 6/19/07 2000 6/29/07 2.52 6/30/07 0.35 7/2/07 4.86 7/6/07 -825 7/6/07 -832 7/6/07 -330 7/12/07 500 7/26/07 500 7/31/07 0.48 8/15/07 11.55 8/30/07 500 8/31/07 0.47 9/28/07 1.5 9/28/07 2.52 9/28/07 -1506.35 9/30/07 0.66 10/1/07 4.86 10/25/07 1089.98 10/25/07 625.28 10/25/07 -368 10/25/07 -360.99 10/25/07 -361 10/25/07 -361 10/30/07 377.99 10/30/07 384.99 10/30/07 385.99 10/30/07 385 10/31/07 0.08 11/2/07 -1849.38 11/15/07 11.55 11/23/07 1700 11/26/07 -1472.1 11/30/07 0.29 11/30/07 0.29 12/5/07 1941.17 12/7/07 -1954.75 12/10/07 8.5 12/14/07 1.5 12/28/07 1475.58 12/28/07 -1672.35 12/31/07 0.17 12/31/07 -10426.06 126.86% I don’t know if this site is still active, but if you could help me with my portfolio calculations it would be GREATLY appreciated.
Basically the XIRR function seems to work most of the time, but for some reason it’s giving me a bogus result for last year. I know it’s probably due somehow to too many sign changes, deposits, dividends, withdrawals etc…

here are the cash flows:
1/1/07 4237.68
1/4/07 2.16
1/31/07 0.04
2/15/07 10.23
2/28/07 0.04
3/7/07 1500
3/15/07 -1495.28
3/30/07 1486.59
3/30/07 2.16
3/31/07 1.14
4/30/07 2.84
5/15/07 11.55
5/16/07 -1500
5/31/07 0.33
6/19/07 2000
6/29/07 2.52
6/30/07 0.35
7/2/07 4.86
7/6/07 -825
7/6/07 -832
7/6/07 -330
7/12/07 500
7/26/07 500
7/31/07 0.48
8/15/07 11.55
8/30/07 500
8/31/07 0.47
9/28/07 1.5
9/28/07 2.52
9/28/07 -1506.35
9/30/07 0.66
10/1/07 4.86
10/25/07 1089.98
10/25/07 625.28
10/25/07 -368
10/25/07 -360.99
10/25/07 -361
10/25/07 -361
10/30/07 377.99
10/30/07 384.99
10/30/07 385.99
10/30/07 385
10/31/07 0.08
11/2/07 -1849.38
11/15/07 11.55
11/23/07 1700
11/26/07 -1472.1
11/30/07 0.29
11/30/07 0.29
12/5/07 1941.17
12/7/07 -1954.75
12/10/07 8.5
12/14/07 1.5
12/28/07 1475.58
12/28/07 -1672.35
12/31/07 0.17
12/31/07 -10426.06
126.86%

]]> By: madmarv http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-874 madmarv Mon, 14 Apr 2008 00:33:47 +0000 http://madmarvonline.com/blog/?p=6#comment-874 Divide the annual rate by the frequency and multiply the number of payments per year by the frequency. In your example, PV = $100, annual rate = 10%, PMT = 5. To calculate annual compounding, the formula is =FV(0.10,5,0,100) and the result is 161.05. To calculate quarterly compounding, divide 10% by 4 and multiply 5 payments by 4. The formula becomes =FV(0.025,20,0,100) and the result is 163.86. The daily compounding formula is =FV(0.000274,1825,0,100) and the result is 164.86. Divide the annual rate by the frequency and multiply the number of payments per year by the frequency.

In your example, PV = $100, annual rate = 10%, PMT = 5.

To calculate annual compounding, the formula is =FV(0.10,5,0,100) and the result is 161.05.

To calculate quarterly compounding, divide 10% by 4 and multiply 5 payments by 4. The formula becomes =FV(0.025,20,0,100) and the result is 163.86.

The daily compounding formula is =FV(0.000274,1825,0,100) and the result is 164.86.

]]> By: Finance student http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-873 Finance student Sun, 13 Apr 2008 03:35:45 +0000 http://madmarvonline.com/blog/?p=6#comment-873 Hi MadMarv, I am trying to assess the imapact of frequent compounding in Excel. I would like to know what happens to the Nominal Annual Rate, Effective Annual RATE and the FV of $100 invested at a Nominal rate of 10% for 5 years. The FV I got for Nper = 5 is $161.05. But I am at a loss how to make entries in Excel for semiannual, quarterly, monthly amd daily. Hope you can help. Thanks. Hi MadMarv, I am trying to assess the imapact of frequent compounding in Excel. I would like to know what happens to the Nominal Annual Rate, Effective Annual RATE and the FV of $100 invested at a Nominal rate of 10% for 5 years. The FV I got for Nper = 5 is $161.05. But I am at a loss how to make entries in Excel for semiannual, quarterly, monthly amd daily. Hope you can help. Thanks.

]]> By: ray potter http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-185 ray potter Fri, 28 Sep 2007 13:15:57 +0000 http://madmarvonline.com/blog/?p=6#comment-185 I would like the algebra formula without using log, because I dont understand log for nper I would like the algebra formula without using log, because I dont understand log for nper

]]> By: madmarv http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-13 madmarv Thu, 08 Mar 2007 07:59:45 +0000 http://madmarvonline.com/blog/?p=6#comment-13 There are a couple of ways to quantify the cost of capital. The simple answer appropriate to most individual investors is to use opportunity cost. In the absence of any specific investment you have waiting the wings, take the expected return of the market as a whole or an index fund. The academic answer is to use the Weighted Average Cost of Capital (WACC). Here's a write up on WACC that I've always liked. http://teachmefinance.com/costofcapital.html There are a couple of ways to quantify the cost of capital. The simple answer appropriate to most individual investors is to use opportunity cost. In the absence of any specific investment you have waiting the wings, take the expected return of the market as a whole or an index fund.

The academic answer is to use the Weighted Average Cost of Capital (WACC). Here’s a write up on WACC that I’ve always liked.

http://teachmefinance.com/costofcapital.html

]]> By: mike http://madmarvonline.com/blog/2007/02/14/excel-tutorial-financial-functions/comment-page-1/#comment-12 mike Thu, 08 Mar 2007 04:55:19 +0000 http://madmarvonline.com/blog/?p=6#comment-12 This is a great write-up. You made clear what the "rate" inputs for the functions PV(), FV(), and PMT() should be (i.e. if quarterly, divide by 4). What you didn't mention (and what I was looking for) was the discount rate used in the NPV() and XNPV() formulas: is that an annual discount rate that you put into the "rate" input? This is a great write-up. You made clear what the “rate” inputs for the functions PV(), FV(), and PMT() should be (i.e. if quarterly, divide by 4). What you didn’t mention (and what I was looking for) was the discount rate used in the NPV() and XNPV() formulas: is that an annual discount rate that you put into the “rate” input?

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