Uses of Application Programs for Learning

CHAPTER 06
FINANCIAL FUNCTION
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INTRODUCTION
1. Simple and Compound Interest Rate
2. FV and PMT Function
3. Workshop practice
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Financial System in Bank

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1.Rate (Simple Interest)

Simple Interest
Simple interest is a quick and
easy method of calculating the interest
charge on a loan. Simple interest is
determined by multiplying the
daily interest rate by the principal by the
number of days that elapse between
payments.
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 Uses of Application Programs for Learning

1.Rate (Compound Interest)

Compound Interest
Compound interest (also known as compounding interest) is the interest on
a loan or deposit calculated based on both the initial principal and the accumulated
interest from previous periods. Believed to have originated in 17th-century Italy,
compound interest can be thought of as “interest on interest. It will make a sum
grow at a faster rate than simple interest, which is calculated only on the principal
amount.
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Uses of Application Programs for Learning
 Uses of Application Programs for Learning
2. FV FUNCTION
FV, one of the financial functions,
calculates the future value of an
investment based on a constant interest
rate. You can use FV with either periodic,
constant payments, or a single lump sum
payment
Syntax
FV(rate,nper,pmt,[pv],[type])
The FV function syntax has the following arguments:
•Rate Required. The interest rate per period.
•Nper Required. The total number of payment periods in an annuity.
•Pmt Required. The payment made each period; it cannot change over
the life of the annuity. Typically, pmt contains principal and interest but no
other fees or taxes. If pmt is omitted, you must include the pv argument.
•Pv Optional. The 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), and you must include the pmt argument.
•Type Optional. The number 0 or 1 and indicates when payments are
due. If type is omitted, it is assumed to be 0.
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 Uses of Application Programs for Learning
3.PMT FUNCTION
PMT, one of the financial functions,
calculates the payment for a loan based on
constant payments and a constant interest
rate.
Syntax
PMT(rate, nper, pv, [fv], [type])
Note: For a more complete description of the arguments in PMT, see
the PV function.
The PMT function syntax has the following arguments:
•Rate Required. The interest rate for the loan.
•Nper Required. The total number of payments for the loan.
•Pv Required. The present value, or the total amount that a series of
future payments is worth now; also known as the principal.
•Fv Optional. The future value, or a cash balance you want to attain
after the last payment is made. If fv is omitted, it is assumed to be 0
(zero), that is, the future value of a loan is 0.
•Type Optional. The number 0 (zero) or 1 and indicates when
payments are due.
Uses of Application Programs for Learning
Uses of Application Programs for Learning