University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

303

Pages:

2
Author:

stud_ice13

Key Financial Formulas and Excel Functions In finance, four essential formulas are used to calculate the present and future values of single amounts and annuities. Here’s an overview of each, along with how they can be calculated using Excel: 1. Present Value (PV) of a Single Amount • Formula: PV=FV(1+i)n where: PV = present value o FV = future value o i = interest rate per period o n = number of periods Excel Formula: =PV(i, n, 0, -FV) o Replace i with the interest rate, n with the number of periods, and FV with the future value amount. o Note: Enter the FV as a negative value if calculating PV of a payment. o • 2. Present Value (PV) of an Annuity • Formula: PV=PMT×1−(1+i)−ni where: PMT = payment per period o i = interest rate per period o n = number of payments Excel Formula: =PV(i, n, -PMT, 0) o Replace i with the interest rate, n with the number of periods, and PMT with the payment amount. o • 3. Future Value (FV) of a Single Amount • Formula: FV=PV×(1+i)n where: PV = present value o i = interest rate per period o n = number of periods Excel Formula: =FV(i, n, 0, -PV) o Replace i with the interest rate, n with the number of periods, and PV with the initial investment amount. o Note: Enter PV as a negative value to calculate the future value of an investment. o • 4. Future Value (FV) of an Annuity • Formula: FV=PMT×(1+i)n−1iFV = PMT where: PMT = payment per period o i = interest rate per period o n = number of payments Excel Formula: =FV(i, n, -PMT, 0) o Replace i with the interest rate, n with the number of periods, and PMT with the payment amount. o • Guided Exercises in Connect Guided Example videos, called “Hints,” offer step-by-step walkthroughs of financial exercises using different values, assisting students in understanding the application of these formulas. These hints are available in Connect and may be enabled by instructors to facilitate learning. These Excel formulas and guided tools simplify complex calculations, making it easier to evaluate financial scenarios for both single amounts and annuities over varying periods and rates.