Financial Software Practical Tutorial Experiment 4170

Introduction

In this experiment, we will learn how to use financial software to perform various financial calculations. We will use Microsoft Excel to perform these calculations, which is a widely used financial software program. We will start by learning how to use Excel's built-in financial functions, and then we will move on to more advanced topics, such as using Excel to create financial models.

Using Excel's Built-in Financial Functions

Excel has a number of built-in financial functions that can be used to perform a variety of financial calculations. These functions can be used to calculate everything from the present value of an investment to the future value of a loan. To use a financial function, simply enter the function name into the formula bar, followed by the arguments for the function. For example, to calculate the present value of an investment, you would enter the following formula into the formula bar:=PV(rate, nper, pmt, [fv], [type])

where:
* rate is the annual interest rate
* nper is the number of periods
* pmt is the payment amount
* fv is the future value (optional)
* type is the type of annuity (0 for an ordinary annuity, 1 for an annuity due)

Creating Financial Models in Excel

In addition to using Excel's built-in financial functions, you can also use Excel to create financial models. A financial model is a spreadsheet that is used to represent a financial situation. Financial models can be used to analyze a variety of financial scenarios, such as the impact of a change in interest rates on the value of a company. To create a financial model in Excel, you will need to enter the relevant financial data into the spreadsheet, and then use Excel's formulas and functions to perform the necessary calculations.

Example: Creating a Loan Amortization Schedule

One of the most common uses of Excel in finance is to create loan amortization schedules. A loan amortization schedule shows how a loan is paid down over time. To create a loan amortization schedule in Excel, you will need to enter the following information into the spreadsheet:* the loan amount
* the interest rate
* the loan term
* the payment frequency
Once you have entered this information, you can use Excel's PMT function to calculate the monthly payment amount. You can then use the CUMIPMT function to calculate the cumulative interest paid for each month of the loan term. The following table shows an example of a loan amortization schedule:| Month | Beginning Balance | Payment | Interest | Principal | Ending Balance |
|---|---|---|---|---|---|
| 1 | $10,000 | $500 | $50 | $450 | $9,550 |
| 2 | $9,550 | $500 | $48 | $452 | $9,098 |
| 3 | $9,098 | $500 | $46 | $454 | $8,644 |
| ... | ... | ... | ... | ... | ... |

Conclusion

Excel is a powerful tool that can be used to perform a variety of financial calculations. In this experiment, we learned how to use Excel's built-in financial functions to calculate the present value of an investment, the future value of a loan, and the monthly payment amount for a loan. We also learned how to create a loan amortization schedule in Excel. These are just a few examples of how Excel can be used to perform financial calculations. With a little practice, you will be able to use Excel to perform a wide variety of financial tasks.

2024-11-22

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