Financial Markets and Institutions

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MAIN MENU -- Chapter 8

Instructions Problem 8

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Copyright © 2004 McGraw-Hill/Irwin

 Financial Markets and Institutions Main Menu

Instructions

Navigating the Workbook

Entering your information
Entering data
Printing

Navigating the Workbook Top

Each chapter of the spreadsheets to accompany Financial Markets and Institutions

contains links to help you navigate the workbook. These hyperlinks help you
move around the workbook quickly. The Main Menu contains links to each
problem from the chapter that contains the Excel icon. From the Main Menu,
click on the question you wish to complete. You can always return to the main
menu by clicking on the link located in the upper right corner of each worksheet.

You can move quickly around an Excel workbook by selecting the worksheet tab
at the bottom of the screen. Each worksheet in an Excel workbook will have its own
tab. In the spreadsheets to accompany Financial Markets and Institutions, you will
see a separate tab for each problem, along with the Main Menu, Instructions and
Help Topics worksheets.

Another way to move quickly around an Excel workbook is by using the following
keyboard shortcuts:
CTRL+PAGE DOWN: Moves you to the next sheet in the workbook.
CTRL+PAGE UP: Moves you to the previous sheet in the workbook.

Entering your information Top

For each question, you will see the following lists and boxes:

Student Name:
Course Name:
Student ID:
Course Number:

Enter your information in these cells before submitting your work.

Entering data Top

To enter numbers or text for these questions, click the cell you want, type the data and
press ENTER or TAB. Press ENTER to move down the column or TAB to move across the row.

For cells or columns where you want to enter text, select “Format,” and then “Cells” from
Excel’s main menu at the top of your screen. Select the “Number” tab and then “Text”
from the category list.

Printing Top

To print your work, select "File," and then "Print Preview" from Excel’s main menu at the top
of your screen. The print area for each question has been set, but be sure to review
the look of your print job. If you need to make any changes, select “Setup” when
you are previewing the document.

Copyright © 2005 McGraw-Hill/Irwin

 Financial Markets and Institutions Main Menu

Help Topics
THE PV FUNCTION
The present value formula, PV, "returns the present value of an investment," or "the total
amount a series of future payments is worth now." Examples include the present value
of a loan to the lender or the present value of $100 received from an investment a number
of years from now.

The syntax for this formula is:

PV(rate,nper,pmt,fv,type)

The first three variables in this function are required. Rate is the interest rate per period.
Remember that rate must be for the actual period. For example, a 10 percent annual
interest rate is equivalent to 10%/12, or 0.0083 per month.

Nper is the total number of payment periods. For example, a four year monthly loan
would have 48 periods. Pmt is the constant amount received or paid each period.

In many cases, this function can also be completed by typing in the formula for the
present value of a cash flow. See the example below.

Interest Rate 7%
Periods 3
Cash Flow 100
Present Value =C27/(1+$C$25)^c26
Present Value 81.63

THE FV FUNCTION Top

The future value function, FV, "returns the future value of an investment," or the total
amount a single investment or series payments will be worth in the future. Examples include the future value
of an investment in a CD at the bank.

The syntax for this formula is:

FV(rate,nper,pmt,pv,type)

The first three variables in this function are required. Rate is the interest rate per period.
Remember that rate must be for the actual period. For example, a 10 percent annual
interest rate is equivalent to 10%/12, or 0.0083 per month.

Nper is the total number of payment periods. For example, a four year monthly loan
would have 48 periods. Pmt is the constant amount received or paid each period; enter 0 here
if you are calculating the future value of a lump sum and place that amount under pv.

In many cases, this function can also be completed by typing in the formula for the
future value of a cash flow. See the example below.

Interest Rate 7%
Periods 3
Cash Flow 100
Present Value =C53*(1+$C$51)^c52
Present Value 122.50

THE RATE FUNCTION

Use Excel's RATE function to find the interest rate for a given payment and period.
The syntax for this formula is:
RATE(nper,pmt,pv,fv,type,guess)

Copyright © 2005 McGraw-Hill/Irwin

The first three variables are required:
Nper is the total number of payment periods. For example, a four year monthly loan
would have 48 periods. Pmt is the constant amount received or paid each period.
pv is the the current value of the annuity (this value is entered as a negative, or outflow).

For example, suppose someone is willing to sell you a ten year annuity paying $15 each year for $80.
What is the rate of return on this annuity?

Periods 10
Cash Flow -15
Present Value 80

Interest Rate 13%

ENTERING FORMULAS IN EXCEL Top

Select the cell in which you want to enter the formula and type an equal sign.
Enter the formula using standard formula operoters such as plus (+) and minus (-). For multiplication use (*).
Use a forward slash (/) for division; and the caret (^) for exponents.

You control the order of calculation by using parentheses to group operations that should be performed first.

One of the best uses of formulas is a reference to another cell. The cell that contains the formula is known
as a dependent cell when its value depends on the values in other cells.
For example, the formula in the cell below calculates a value depending on what is entered in the cell to its right.
25 50

Copyright © 2005 McGraw-Hill/Irwin

 Chapter 8
Problem 8: Using a Spreadsheet to Calculate Stock Returns (LG 8-5)

Student Name:
Course Name:
Student ID:
Course Number:

Select the red highlighted items below for tips and suggestions to complete this problem.

Price at Price at
beginning end of => Stock
of year Dividends year Return
$50.00 $ 4.50 $40.00 = FORMULA For help with entering form
$50.00 $ 4.50 $48.00 =
$50.00 $ 4.50 $50.00 =
$50.00 $ 4.50 $55.00 =

Copyright © 2005 McGraw-Hill/Irwin