Debt Functions in Excel- Same as your Financial Calculator

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The driving force of the majority of financial models is how much and when money is received or paid and this is due to the time value of money. $100 received today is worth more than $100 to be received in a year’s’ time. For one thing there is the opportunity cost of the lost interest on the money. There is also the additional risk associated with waiting for your money.

In this regard Excel has a number of functions that deal with the time value of money.

To follow along go to 17.3

At a basic level you have the traditional functions relating to calculating the present and future value of money assuming some constant assumptions.

In the picture below you can see that given any four items of a calculation, you can use the specific Excel function to calculate the missing number.

Financial Calculator Functions

Some things to remember when using these functions (same will apply with your Financial Calculator)

  • The Rate (interest rate) will need to be divided by the number of compounding periods in most of the calculations except for the RATE function in which case it will need to be multiplied by the compoundings
  • The sign on the FV (future value) will normally need  to be the same sign as you use on the PMT (payment) and opposite to the sign on the PV (present value)
  • The Type option will normally be 0 (end of period payments).

Back to: Financial Calculations and compound interest in Excel > Time Value of Money- Debt, NPV, IRR