Calculating cosines and analyzing statistical trends may seem like a great way to tap Excel’s brainpower. But what if you want help tracking the movement of small pieces of green paper from one bank account to another? Fortunately, Excel’s no slouch when it comes to dealing with money. In fact, it comes with a slew of financial functions that can help you figure out the bottom line like a pro.
Microsoft designed the majority of Excel’s financial functions to help you determine how numbers change over time. You can use them to track soaring assets or mounting debts. In this chapter, you’ll start by learning the basic concepts, like present value and payment period, which Excel bases all of its financial functions on. Afterwards, you’ll take a close look at some of the most useful financial functions, complete with examples that answer common questions about mortgages, loans, and investments.
Before you start using Excel’s financial functions, it helps to understand the financial concepts that lie at the heart of many of these operations. Here are some terms that those wacky accountants love to use:
Present Value (PV). The value of an investment or loan at the very beginning of its life. (Hopefully, after this point, the investment will rise or you’ll begin to pay off the loan.) This number’s also called the principal.
Future Value (FV). The value of an investment or loan at some point in the future.
Rate. The rate at which an investment ...