Using the Excel Help menu, familiarize yourself with the following functions. Create a simple example and demonstrate the proper use of the function.

Question

(a) FV(rate, nper, pmt, pv, type)
(b) IPMT(rate, per, nper, pv, fv, type)
(c) NPER(rate, pmt, pv, fv, type)
(d) PV(rate, nper, pmt, fv, type)

Answer 1

(a) FV(rate,nper,pmt,pv,type)
Returns the future value of a series of payments.
rate: interest rate per period; nper: total number of payment periods in an
annuity; Pmt: payment made each period; Pv: present value, or the lump-sum
amount that a series of future payments is worth right now. If pv is omitted, it is
assumed to be 0 (zero); type is the number 0 or 1 indicating when payments are
due, end or the beginning of period.
Example: The future value of $1000 deposits every year for 10 years at 8%
interest rate is: FV(8%,10,-1000,0,0) = $14,486.5
(b) IPMT(rate,per,nper,pv,fv,type)
Returns the interest payment for an investment or interest due to a loan.
rate: interest rate per period; per: the period for which you want to find the
interest; nper: total number of payment periods in an annuity; Pv: is the present
value, or the lump-sum amount that a series of future payments is worth right
now; fv: the future value; type: the number 0 or 1 and indicates when payments
are due.
Example: The interest due to a $1000 loan at the end of one year at 8% interest
rate is: IPMT (8%,1,1,1000,0,0) = 80
(c) NPER(rate,pmt,pv,fv,type)
Returns number of payments for an investment.
rate: interest rate per period; nper: total number of payment periods in an
annuity; pmt: payment made each period; pv: present value, or the lump-sum
amount that a series of future payments is worth right now. If pv is omitted, it is
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assumed to be 0 (zero); type is the number 0 or 1 indicating when payments are
due, end or the beginning of period.
Example: If you were to put $6710.08 in an account that pays 8% annually, over
how many periods (years) you can withdraw $1000?
NPER(8%,1000,-6710.08,0,0) = 10 See also next example.
(d) PV(rate,nper,pmt,fv,type)
Returns the present value of a series of payments.
rate: interest rate per period; nper: total number of payment periods in an
annuity; Pmt: payment made each period; Pv: present value, or the lump-sum
amount that a series of future payments is worth right now. If pv is omitted, it is assumed to be 0 (zero); type is the number 0 or 1 indicating when payments are due, end or the beginning of period.
Example: The present value of $1000 deposits every year for 10 years at 8%
interest rate is: PV(8%,10,-1000,0,0) = $6710.08. In other word, today, if you were to put $6710.08 in an account that pays 8% annually, you can withdraw
$1000 every year for the next 10 years.