Setting up Deposit and Loan Tables

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} Concepts in loan amortization
◦ Present Value (PV): This is the principal amount
present value may be positive
or negative.
◦ Future Value (FV): This is the principal plus interest.
◦ Payment (PMT): This is the periodic payment on a
deposit or loan usually a constant
and comprised of principal and
interest elements
◦ Interest Rate (Rate): Interest is a percentage of
principal, usually expressed on an
annual basis.
◦ Period/Type: This represent the point in time
when interest is paid or earned.
◦ Term: This is the duration of time for
interest payment/maturity

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} Loan management will require the follow:
◦ The Loan Amount
◦ The Interest Rate
◦ The No. of Payments periods
◦ The Periodic payment amount

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} Some Financial Functions in Excel
◦ Payment Function
– This returns the loan payment (principal plus interest) per period,
assuming constant payment amount and a Fixed interest rate.
– Syntax:
– PMT (rate, nper, PV, FV, type)
◦ Where,
– rate = rate of interest
– Nper = total no. of payment periods
– PV = present value of the loan, that is the original loan
amount
– FV = future value of a loan; that is total interest plus
loan amount at the end of the loan period
– Type = due payment date which could be 0 (due at the end
of the period), 1 due at the beginning of the
period
◦ for example the following syntax =PMT($B$2*($B$3/12),$B$4,-$B$1) returne a
value for the payment amount

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} The PPMT Function
◦ The PPMT Function returns the principal part of a loan payment
for a given period, assuming constant payment amount and a
Fixed Interest.
◦ Syntax:
– PPMT (rate, per, nper, PV, FV, type); the variables are
as defined before
◦ For example the following syntax returns the Principal Payment
amount for a particular case
=PPMT($B$2*($B$3/12),A10,$B$4,-$B$1)

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} The IPMT Function
◦ This function returns the interest part of a loan payment for a
given period assuming constant payment amount and a fixed
interest rate.
◦ Syntax:
◦ IPMT (rate, per, nper, PV, FV, type)
} =IPMT($B$2*($B$3/12),A10,$B$4,-$B$1)

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} The Rate Function
◦ This function returns the periodic interest rate of a loan given the
number of payment periods, the periodic payment amount and
the loan amount.
– Syntax:RATE (nper, pmt, PV, FV, type,)

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} Financial Function Argument
◦ Rate: The interest rate per period. If the rate is
expressed as an annual interest rate, you
must divide by the no of periods.
◦ Nper: The total number of payment periods.
◦ Per: A particular period. The period must be less
than or equal to nper.
◦ Pmt: The payment made each period ( a constant
value that does not change over the life of the
annuity.
◦ Fv The future value after the last payment is
made. If you omit fv , it is assumed to be 0
(zero), that is, the future value of a loan, for
example, is 0)
◦ Type: Indicate when payments are due either 0 (due
at the end of the period) or 1 (due at the
beginning of the period). If you omit type, it is
assumed to be 0.
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} Simple Interest ….this is given by:
◦ Interest = Principal * Rate * Time or Term
– Given the data below:
– Investment amount N10,000
– Annual Interest Rate = 23%
– Term =1

Interest will be: 2,300

Investment at the end of the period will be N12,300

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} Compound Interest
◦ Given the data as in the previous slide generate a
table for the investment on a compound interest
basis for 12 months.
◦ The table below shows the result.

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Compound Interest Calculation

Monthly Compounding

deposit Amount 10,000.00

Annual Interest 23%
Term (Months) 12.00

Month Intrest Earned Balance

Beginning Balance 10,000.00
1 191.67 10,191.67 10,191.67
2 195.34 10,387.01 10,387.01
3 199.08 10,586.09 10,586.09
4 202.90 10,788.99 10,788.99
5 206.79 10,995.78 10,995.78
6 210.75 11,206.53 11,206.53
7 214.79 11,421.32 11,421.32
8 218.91 11,640.23 11,640.23
9 223.10 11,863.34 11,863.34
10 227.38 12,090.72 12,090.72
11 231.74 12,322.46 12,322.46
12 236.18 12,558.64 12,558.64

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} A One-Way data table to display loan calculations
for six different interest rates.
◦ Given the following data:
– Loan Amount = N10,000,000
– Annual Interest = 23%
– Payment Type = 1
– Number of Periods = 36

– To be Calculated are:
– Payment Amount
– Total Payment Amount
– Total Interest Amount

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} One-way Loan Table
◦ Steps:
– Enter the formulas that return the results for use in the data table.
In this example, the formula are in B6:B8 (PMT fx)
– Enter various values for a single input cell in successive columns. In
this example, the input value is interest rates appearing in C9:I9
– Create a reference to the formula cells in the column to the left of
the input values. In this example, the range B10:B12 contains
simple formulas that reference other cells. For example, B10
contains the following formula:=B6
– Select the rectangular range that contains the entries from the
previous steps. In this example, select B10:I13.
– Select the Data menu
– Choose the Table command. Excel display the Table dialog box as
shown below:

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} One-way Loan Table
◦ Steps:

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} One-way Loan Table
◦ Steps:
– For the Row input cell field, specify the cell
reference that corresponds to the variable in
your Data Table column header row. In this
example, the Row input cell is B2
– Leave the Column input cell field empty.
– Click OK. Excel insert an array formula that uses
the TABLE function with a single argument.

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 Loan Amount200,000.00
Annual Interest
Rate 7.25%
Payment Period 1.00
Number of
Periods 24.00

Payment
Amount 8,977.20
Total Paymants215,452.80
Total Interest 15,452.80
7.00% 7.25% 7.50% 7.75% 8.00% 8.25% 8.50%
Payment
Amount 8,977.20 8,954.52 8,977.20 8,999.92 9,022.67 9,045.46 9,068.28 9,091.13

Total PMT215,452.80 214,908.38 215,452.80 215,998.04 216,544.11 217,091.00 217,638.71 218,187.24

Total Interest 15,452.80 14,908.38 15,452.80 15,998.04 16,544.11 17,091.00 17,638.71 18,187.24

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} Creating a Two-way Loan Table Summary
◦ A two-way data table shows the result of a single
calculation for different values of two input cells.
◦ The figure below shows a two-way data table that
displays a calculation (payment amount) for a loan,
using seven interest rates and six loan amounts
◦ The following steps are relevant in this process:

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} Creating a Two-way Loan Table Summary
◦ Steps
– Enter a formula that returns the result that will be used in
the data table. In this example the formula cell is in B6.
The formulas in B9:B11 are not used.
– Enter various values for the first input in successive
columns. In this example, the first input value is interest
rate, and the values for various interest rates appear in
C15:I15.
– enter various values for the second input cell in the
successive rows, to the left and below the input values for
the first input . In this example, the second input value is
loan amount, and the values for various loan amount are
in B16:B21.

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} Creating a Two-way Loan Table Summary
◦ Steps
– create a reference to the formula that will be calculated in
the table. This reference goes in the upper left corner of
the data table range. In this example, cell B15 contains
the following formula: =B9
– Select the rectangular range that contains the entries
from the previous steps. In this example, select B15:I21
– Select Data menu
– Choose Table command. Excel displays dialog box as
shown below

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} Creating a Two-way Loan Table Summary
◦ Steps

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} Creating a Two-way Loan Table Summary
◦ Steps
– For the Row input cell field, specify the cell
reference that corresponds to the second input
cell. In this example, the Row input cell is B5
– For the column input cell field, specify the cell
reference that corresponds to the second input
cell. In this example, the Row input cell is B4
– Click OK. Excel inserts an array formula that
uses the TABLE Function with two arguments.
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Loan Amount 10,000.00
Annual Interest Rate 7.25%
Payment Period 1
Number of Periods 36

Payment Amount 309.92

Total Paymants 11,156.95
Total Interest 1,156.95

INTEREST RATES
309.92 7.00% 7.25% 7.50% 7.75% 8.00% 8.25% 8.50% 8.75%
9,000.0 277.9 278.9 280.0 281.0 282.0 283.1 284.1 285.2
9,500.0 293.3 294.4 295.5 296.6 297.7 298.8 299.9 301.0
Loan Amounts 10,000.0 308.8 309.9 311.1 312.2 313.4 314.5 315.7 316.8
10,500.0 324.2 325.4 326.6 327.8 329.0 330.2 331.5 332.7
11,000.0 339.6 340.9 342.2 343.4 344.7 346.0 347.2 348.5
11,500.0 355.1 356.4 357.7 359.0 360.4 361.7 363.0 364.4

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} Creating a loan Amortization Schedule.
◦ A loan amortization schedule is a table of values that depicts
various information for each payment period of a loan. Typical
amortization schedules will contains the following headings:

◦ Payment Period: This start from 0,1….n to last

period of repayment (pr)
◦ Payment Amount: This is the period payment of
loan repayment. This is obtained
by applying PMT function (fx).
◦ Cumulative Payment: This is the addition of periodic
payment(s).
◦ Interest: This is the periodic interest
payable on the loan and is
obtained by applying PMT fx
(usually included in PMT.)
}

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} Cumulative Interest: This is the addition of periodic
interest paid along with
payment as calculated in IPMT
col.
} Principal: This calculates the principal
portion of the periodic payment
and is obtained by applying the
PPMT fx.
} Cumulative Principal: Calculate the cumulative
amount applied toward
principal.hat is Cumulative of
PPMT fx.
} Principal Balance: Returns the principal balance at
the end of the period. That is
the value in 0 period less value
of principal paid.
} Note:
} When preparing Amortization schedule, it is advisable you
create separate table where the loan information will be
stored, from which amortization schedule

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25
} Excel offers different functions to calculate
depreciation of an asset over time.
} Depreciating an asset places a value on the
asset at a point in time, based on the original
value and its life.
} The function that you choose depends on the
type of depreciation method that you use.
Depreciation Method Function Arguments

Straight Line Method SLN Cost, Salvage,Life

Declining/Reducing Balance DB Cost, Salvage, Life,
Period, [Month]

Double-Declining Balance. Depreciation is DDB Cost, Salvage, Life,

highest in the first period, and decreases in Period, Month,
successive periods. [Factor]

Sum of Year’s Digits. Allocate a large SYD Cost, Salvage, Life,

depreciation in the earlier year of an asset life Period,
Arguments
— Cost: Original cost of the asset
— Salvage: Scrap value after being fully
depreciated
— Life: Number of periods over which the
asset will be depreciated
— Period: Period in life in which the calculation
is being made
— Month: Number of months in the first year;
if omitted, Excel uses 12
— Factor: Rate at which the balance declines; if
omitted, it is assumed to be 2
(that is, double-declining)