Quantitative Finance

Appendix 3: Naming Variables in Excel

It is easy to understand the formula

$PV=Y\ast {\left(1+\frac{r}{n}\right)}^{-n\ast T}$

This means that we are using compound interest rate for bond pricing.

However, it might not be nearly as easy to figure out what this formula means:

$D5=A2\ast {\left(1+\frac{B2}{C2}\right)}^{-C2\ast D2}$

This is despite the fact that the two formulas code the exact same idea! So, can we transfer the second kind of formula into the first kind using Excel? The answer is yes! First, we have to set up Excel. This functionality exists for Excel 2007 and after. Open Excel, and click on the “File.”

Then choose “Option,”

Then we click on “Quick Access Toolbar,” go with “Formula Tab,” ...