UNIT-1

ACCRINT helps users calculate the accrued interest on a security, such as a bond, when that
security is sold or is transferred to a new owner on a date other than the issue date or on a date
that is an interest payment date.

=ACCRINT(issue, first_interest, settlement, rate, par, frequency, [basis], [calc_method])

The ACCRINT function uses the following arguments:

1. Issue (required argument) – This is the security’s issue date.

2. First_interest (required argument) – This is the first interest date of the security.
3. Settlement (required argument) – The security’s settlement date. It is the date after the
issue date when the security is traded to the buyer.
4. Rate (required argument) – The security’s annual coupon rate.
5. Par (required argument) – The security’s par value. If omitted by the user, the function
will take the par value as $1,000.
 6. Frequency (required argument) – This is the number of coupons payments per year. The
function will take for annual payments, frequency = 1; for semiannual, frequency = 2; for
quarterly, frequency = 4.
7. Basis (optional argument) – This is the kind of day count that is used for calculating the
interest on a given security. If we omit the argument, the basis is set to 0. Basis can be
any of the following values

Basis Day Count basis

0 or omitted US(NASD) 30/360

1 Actual/actual

2 Actual/360

3 Actual/365

4 European 30/360

8. Calc_method (optional argument) – It is either 0 (calculates the accrued interest from

first_interest_date to settlement_date) or 1 (calculates the accrued interest from issue_date to
settlement_date).

2. ACCRINTM calculates the interest that is paid at maturity, or the lump sum interest
when a security expires/matures.
Formula

=ACCRINTM(issue, settlement, rate, par, [basis])

The ACCRINTM function uses the following arguments:

 1. Issue (required argument) – This is the security’s issue date. If it is not an integer, it
will be truncated.
2. Settlement (required argument) – The security’s maturity date, which is when the
security expires.
3. Rate (required argument) – This is the security’s annual coupon rate.
4. Par (required argument) – The security’s par value. If omitted, then ACCRINTM
function will take the par value as $1,000.
5. Basis (optional argument) – This is the kind of day count that is used for calculating
the interest on a given security. If we omit the basis argument, it is set to 0. Basis can
be any of the following values:

Basis Day Count basis

0 or omitted US(NASD) 30/360

1 Actual/actual

2 Actual/360

3 Actual/365

4 European 30/360
4. The AMORLINC function returns the depreciation for an accounting period, or the
prorated depreciation if the asset was purchased in the middle of a period. This function is
available for users of the French accounting system. If an asset is purchased in the middle
of the accounting period, the prorated depreciation is taken into account.

The AMORLINC function syntax has the following arguments:

■ Cost Required. The cost of the asset.

■ Date_purchased Required. The date of the purchase of the asset.
■ First_period Required. The date of the end of the first period.
■ Salvage Required. The salvage value at the end of the life of the asset.
■ Period Required. The period.
■ Rate Required. The rate of depreciation.
■ Basis Optional. The year basis to be used.
5. The COUPDAYBS Function is a financial function in Microsoft Excel that calculates the
number of days from the beginning of a coupon period until its settlement date. In other
words, the COUPDAYBS function helps return the number of days between the settlement
date and the last time a coupon was paid.

COUPDAYSNC function - Returns the number of days from the settlement date to the next
coupon date
The COUPDAYBS function syntax has the following arguments:

■ Settlement Required. The security's settlement date. The security settlement

date is the date after the issue date when the security is traded to the buyer.
■ Maturity Required. The security's maturity date. The maturity date is the
date when the security expires.
■ Frequency Required. The number of coupon payments per year. For annual
payments, frequency = 1; for semiannual, frequency = 2; for quarterly,
frequency = 4.
■ Basis Optional. The type of day count basis to use.

6. COUPDAYS function to return the number of coupon days in the coupon period that
contains the settlement date

Description

Returns the number of days in the coupon period that contains the settlement date.

The COUPDAYS function syntax has the following arguments:

■ Settlement Required. The security's settlement date. The security settlement
date is the date after the issue date when the security is traded to the buyer.
■ Maturity Required. The security's maturity date. The maturity date is the
date when the security expires.
■ Frequency Required. The number of coupon payments per year. For annual
payments, frequency = 1; for semiannual, frequency = 2; for quarterly,
frequency = 4.
■ Basis Optional. The type of day count basis to use.
helps calculate the number of days from the settlement date to the next coupon rate

Formula

=COUPDAYSNC(settlement, maturity, frequency, [basis])

The COUPDAYSNC function uses the following arguments:

1. Settlement (required argument) – This is the settlement date of a given security. It is

the date after the security is traded to the buyer.
2. Maturity (required argument) – This is the date when the security expires.
3. Frequency (required argument) – The number of coupon payments per year. The
argument can take a value of 1 (annual payment), 2 (semi-annual payments), or 4
(quarterly payments).
4. Basis (optional argument) – This specifies the day count basis to be used.

coupon bonds pay interest at regular intervals. MS Excel introduced the COUPDAYSYNC
function to calculate the days before we get paid. Thus, it allows us to manage cash flows in
an efficient manner.
The COUPNCD function calculates the next coupon date after a given settlement date,
using the maturity date, frequency and basis as additional inputs.

COUPNCD function - Returns the next coupon date after the settlement date

The COUPNCD function uses the following arguments:

1. Settlement (required argument) – This is the settlement date of a given security. It is

the date after the security is traded to the buyer.
2. Maturity (required argument) – This is the date when the security expires.
3. Frequency (required argument) – The number of coupon payments per year. The
argument can take a value of 1 (annual payment), 2 (semi-annual payments), or 4
(quarterly payments).
4. Basis (optional argument) – This specifies the day count basis to be used. It uses one
of the following values:

Basis Day Count basis

0 or omitted US(NASD) 30/360
1 Actual/actual
2 Actual/360
3 Actual/365
4 European 30/360

COUPNUM function - Returns the number of coupons payable between the settlement date
and maturity date
COUPPCD function - Returns the previous coupon date before the settlement date
=CUMIPMT(rate,nper,pv,start_period,end_period,type)
● rate - The interest rate per period.
● nper - The total number of payments for the loan.
● pv - The present value, or total value of all payments now.
● start_period - First payment in calculation.
● end_period - Last payment in calculation.
● type - When payments are due. 0 = end of period. 1 = beginning of period.

The inputs to CUMIPMT are as follows:

■ rate = 5%/12 = 0.00416 (since it's an annual interest rate with monthly
compounding)
■ nper = 5*12 = 60 (a 5-year loan has 60 periods)
■ pv = 10,000 (the loan amount)
■ start_period = 1 (the first period)
■ end_period = 60 (the last period)
■ type = 0 (payments at the end of each month)
 UNIT-2
1. DB Function
The DB Function[1] is an Excel Financial function. This function helps in
calculating the depreciation of an asset. The method used for calculating
depreciation is the Fixed Declining Balance Method for each period of the
asset's lifetime.
Formula

=DB(cost, salvage, life, period, [month])

The DB function uses the following arguments:

1. Cost (required argument) – This is the initial cost of the asset.

2. Salvage (required argument) – The value of the asset at the end of the
depreciation.
3. Life (required argument) – This is the useful life of the asset or the number of
periods for which we will be depreciating the asset.
4. Period (required argument) – The period for which we wish to calculate the
depreciation for.
5. Month (optional argument) – Specifies how many months of the year are used
in the calculation of the first period of depreciation. If omitted, the function will
take the default value of 12.

Example 1

Assume we wish to calculate the depreciation for an asset with an initial cost of
$100,000. The asset’s salvage value after 5 years is $10,000.
We will calculate the depreciation for all five years. The formula used is:

The month argument was left blank, so the function would assume it as 12. For each
year, we will only change the period, as shown below:
The result we got for five years is below:

The DB function uses the fixed-declining balance method to compute the asset’s
depreciation at a fixed rate. The formula used by DB to calculate depreciation for a
period is:

=(Cost – Total depreciation from prior periods) * Rate

Where:

Rate = 1 – ((salvage / cost) ^ (1 / life)).

Different formulas are used for first and last periods. For the first period, DB uses the
following formula:

=Cost * Rate * Month / 12

For the last period, DB uses the following formula:

=((Cost – Total depreciation from prior periods) * Rate * (12 – month)) / 12

2. DDB FUNCTION
The double-declining balance (DDB) method is a type of declining balance method that instead
uses double the normal depreciation rate.

The DDB function is one of the financial functions. It is used to calculate the depreciation of an
asset for a specified accounting period using the double-declining balance method.

Syntax

DDB(cost, salvage, life, period, [factor])

The DDB function has the following arguments:Notes

All the values must be positive numbers.

Examples

The figure below displays the result returned by the DDB function.
3. DISC

■ Settlement, maturity, and basis are truncated to integers.

■ If settlement or maturity is not a valid serial date number, DISC
returns the #VALUE! error value.
■ If pr ≤ 0 or if redemption ≤ 0, DISC returns the #NUM! error value.
■ If basis < 0 or if basis > 4, DISC returns the #NUM! error value.
■ If settlement ≥ maturity, DISC returns the #NUM! error value.
■ DISC is calculated as follows:
4. The DOLLARDE Function is an Excel Financial function. It helps in converting a dollar
value in fractional notation into a dollar value expressed in decimal notation.
The Excel DOLLARDE function converts a dollar price entered with a special notation to
a dollar price displayed as a decimal number.
Description

Converts a dollar price expressed as an integer part and a fraction part, such as 1.02, into a dollar
price expressed as a decimal number. Fractional dollar numbers are sometimes used for security
prices.

The fraction part of the value is divided by an integer that you specify. For example, if you want
your price to be expressed to a precision of 1/16 of a dollar, you divide the fraction part by 16. In
this case, 1.02 represents $1.125 ($1 + 2/16 = $1.125).

Formula

DOLLARDE(fractional_dollar, fraction)
The DOLLARDE function uses the following arguments:
1. Fractional_dollar (required argument) – This is the number expressed as an integer part
and a fraction part, separated by a decimal point.
2. Fraction (required argument) – This is the integer to be used in the denominator of a
fraction. We need to provide it as an integer, but in case of a decimal value, Excel will
truncate it to an integer.
Description

Use DOLLARFR to convert decimal numbers to fractional dollar numbers, such as securities
prices.

Syntax

DOLLARFR(decimal_dollar, fraction)

The DOLLARFR function syntax has the following arguments:

■ Decimal_dollar Required. A decimal number.

■ Fraction Required. The integer to use in the denominator of a fraction.

Remark

❖ If a fraction is not an integer, it is truncated.

❖ If fraction is less than 0, DOLLARFR returns the #NUM! error value.
❖ If fraction is 0, DOLLARFR returns the #DIV/0! error value.
6. DURATION function

The DURATION function, one of the Financial functions, returns the Macauley duration for an
assumed par value of $100. Duration is defined as the weighted average of the present value of
cash flows, and is used as a measure of a bond price's response to changes in yield.

The DURATION Function is categorized under Excel Financial functions. It helps to calculate
the Macauley Duration. The function calculates the duration of a security that pays interest on a
periodic basis with a par value of $100. DURATION is commonly used by Portfolio Managers
who use the immunization strategy.

Syntax

DURATION(settlement, maturity, coupon, yld, frequency, [basis])

The DURATION function syntax has the following arguments:

■ Settlement Required. The security's settlement date. The security settlement date is the
date after the issue date when the security is traded to the buyer.
■ Maturity Required. The security's maturity date. The maturity date is the date
when the security expires.
■ Coupon Required. The security's annual coupon rate.
■ Yld Required. The security's annual yield.
■ Frequency Required. The number of coupon payments per year. For annual
payments, frequency = 1; for semiannual, frequency = 2; for quarterly, frequency =
4.
■ Basis Optional. The type of day count basis to use.
7. What is the EFFECT Function?
The EFFECT Function[1] is categorized under Excel Financial functions. It will calculate the
annual interest rate with the number of compounding periods per year. The effective annual
interest rate is often used to compare financial loans with different compounding terms.

As a financial analyst, we often need to make decisions on which financial loan will be best for a
company. The EFFECT function will be helpful in such scenario and will facilitate comparisons,
ultimately helping in making a decision.

Formula
=EFFECT(nominal_rate, npery)

The EFFECT function uses the following arguments:

1. Nominal_rate (required argument) – This is the nominal or stated interest rate.

2. Npery (required argument) – This is the number of compounding periods in one year.
8. 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.
Use the Excel Formula Coach to find the future value of a series of payments. At the same time,
you'll learn how to use the FV function in a formula.

Or, use the Excel Formula Coach to find the future value of a single, lump sum payment.

Syntax

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

For a more complete description of the arguments in FV and for more information on annuity
functions, see PV.

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.
9. FVSCHEDULE FUNCTION

Description: Returns the future value of an initial principal after applying a series of compound
interest rates. Use FVSCHEDULE to calculate the future value of an investment with a variable
or adjustable rate.

Syntax

FVSCHEDULE(principal, schedule)

The FVSCHEDULE function syntax has the following arguments:

● Principal Required. The present value.

● Schedule Required. An array of interest rates to apply.