Financial Analysis using Excel - Jlab finance - Free

254 Pages·2002·1.65 MB·English

FinFunction ancial
Information requirements for function
Dates Prices and par values Frequency, Yields and
and related interest/ discount
rates
d
Ana lIssue First coupon y Settlement Maturitys Priceis Par/coupon ny amount pai at maturity? uInvestment amount Redemption amountsFrequency of payments pai # of periodsn Basis Yieldg Discount Interest
A
ECxOUPDAYcBS e l(cid:57) (cid:57) (cid:57) (cid:57)
COUPDAYS (cid:57) (cid:57) (cid:57) (cid:57)
COUPDAYSNC (cid:57) (cid:57) (cid:57) (cid:57)
COUPNCD (cid:57) (cid:57) (cid:57) (cid:57)
COUPPCD (cid:57) (cid:57) (cid:57) (cid:57)
COUPNUM (cid:57) (cid:57) (cid:57) (cid:57)
DURATION (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
MDURATION (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
PRICE (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
PRICEDISC (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
PRICEMAT (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
RECEIVED (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
YIELD (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
YIELDDISC (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
YIELDMAT (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
ACCRINT (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
ACCRINTM (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)

INTRATE (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)
DISC (cid:57) (cid:57) (cid:57) (cid:57) (cid:57) (cid:57)

Excel for Professionals  2002 VJ Books. All rights reside with the author.
Financial Analysis using Excel
FFFiiinnnaaannnccciiiaaalll AAAnnnaaalllyyysssiiisss uuusssiiinnnggg EEExxxccceeelll
Volume 6 in the series EEExxxccceeelll fffooorrr PPPrrrooofffeeessssssiiiooonnnaaalllsss
Volume 1: Excel For Beginners
Volume 2: Charting in Excel
Volume 3: Excel-- Beyond The Basics
Volume 4: Managing & Tabulating Data in Excel
Volume 5: Statistical Analysis with Excel
Volume 6: Financial Analysis using Excel
Published by VJ Books Inc
All rights reserved. No part of this book may be used or reproduced in any form or by
any means, or stored in a database or retrieval system, without prior written
permission of the publisher except in the case of brief quotations embodied in
reviews, articles, and research papers. Making copies of any part of this book for any
purpose other than personal use is a violation of United States and international
copyright laws.
First year of printing: 2002
Date of this copy: Saturday, December 14, 2002
This book is sold as is, without warranty of any kind, either express or implied,
respecting the contents of this book, including but not limited to implied warranties
for the book's quality, performance, merchantability, or fitness for any particular
purpose. Neither the author, the publisher and its dealers, nor distributors shall be
liable to the purchaser or any other person or entity with respect to any liability, loss,
or damage caused or alleged to be caused directly or indirectly by the book.
This book is based on Excel versions 97 to XP. Excel, Microsoft Office, Microsoft
Word, and Microsoft Access are registered trademarks of Microsoft Corporation.
Publisher: VJ Books Inc, Canada
Author: Vijay Gupta
2
To Dr “Chini” at the Business School Georgetown Universitry
and SEC.

Thanks for the timely support and advice.

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Financial Analysis using Excel

AAABBBOOOUUUTTT TTTHHHEEE AAAUUUTTTHHHOOORRR
Vijay Gupta has taught statistic, econometrics, and finance to institutions in
the US and abroad, specializing in teaching technical material to
professionals.
He has organized and held training workshops in the Middle East, Africa,
India, and the US. The clients include government agencies, financial
regulatory bodies, non-profit and private sector companies.
A Georgetown University graduate with a Masters degree in economics, he
has a vision of making the tools of econometrics and statistics easily
accessible to professionals and graduate students. His books on SPSS and
Regression Analysis have received rave reviews for making statistics and
SPSS so easy and “non-mathematical.” The books are in use by over 150,000
users in more than 140 nations.
He is a member of the American Statistics Association and the Society for
Risk Analysis.
In addition, he has assisted the World Bank and other organizations with
econometric analysis, survey design, design of international investments,
cost-benefit, and sensitivity analysis, development of risk management
strategies, database development, information system design and
implementation, and training and troubleshooting in several areas.
Vijay has worked on capital markets, labor policy design, oil research, trade,
currency markets, and other topics.
4
VVVIIISSSIIIOOONNN
Vijay has a vision for software tools for Office Productivity and
Statistics. The current book is one of the first tools in stage one of his
vision. We now list the stages in his vision.
Stage one: Books to Teach Existing Software
He is currently working on books on word-processing, and report
production using Microsoft Word, and a booklet on Professional
Presentations.
The writing of the books is the first stage envisaged by Vijay for
improving efficiency and productivity across the world. This directly
leads to the second stage of his vision for productivity improvement
in offices worldwide.
Stage two: Improving on Existing Software
The next stage is the construction of software that will radically
improve the usability of current Office software.
Vijay’s first software is undergoing testing prior to its release in Jan
2003. The software — titled “Word Usability Enhancer” — will
revolutionize the way users interact with Microsoft Word, providing
users with a more intuitive interface, readily accessible tutorials, and
numerous timesaving and annoyance-removing macros and utilities.
He plans to create a similar tool for Microsoft Excel, and, depending
on resource constraints and demand, for PowerPoint, Star Office, etc.
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Financial Analysis using Excel
Stage 3: Construction of the first “feedback-designed” Office and Statistics
software
Vijay’s eventual goal is the construction of productivity software
that will provide stiff competition to Microsoft Office. His hope is
that the success of the software tools and the books will convince
financiers to provide enough capital so that a successful software
development and marketing endeavor can take a chunk of the multi-
billion dollar Office Suite market.
Prior to the construction of the Office software, Vijay plans to
construct the “Definitive” statistics software. Years of working on
and teaching the current statistical software has made Vijay a
master at picking out the weaknesses, limitations, annoyances, and,
sometimes, pure inaccessibility of existing software. This 1.5 billion
dollar market needs a new visionary tool, one that is appealing and
inviting to users, and not forbidding, as are several of the current
software. Mr. Gupta wants to create integrated software that will
encompass the features of SPSS, STATA, LIMDEP, EViews,
STATISTICA, MINITAB, etc.
Other
He has plans for writing books on the “learning process.” The books
will teach how to understand one’s approach to problem solving and
learning and provide methods for learning new techniques for self-
learning.

6
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CHAPTER 1 WRITING FORMULAS 25
1.1 The Basics Of Writing Formulae 26
1.2 Tool for using this chapter effectively: Viewing the formula instead of the end
result 26
1.2.a The “A1” vs. the “R1C1“ style of cell references 28
1.2.b Writing a simple formula that references cells 29
1.3 Types Of References Allowed In A Formula 30
1.3.a Referencing cells from another worksheet 30
1.3.b Referencing a block of cells 30
1.3.c Referencing non–adjacent cells 31
1.3.d Referencing entire rows 32
1.3.e Referencing entire columns 32
1.3.f Referencing corresponding blocks of cells/rows/columns from a set of
worksheets 33
1.4 Working Simultaneously On Cells In Different Worksheets 34
CHAPTER 2 COPYING/CUTTING AND PASTING FORMULAE 36
2.1 Copying And Pasting A Formula To Other Cells In The Same Column 37
2.2 Copying And Pasting A Formula To Other Cells In The Same Row 38
2.3 Copying And Pasting A Formula To Other Cells In A Different Row And Column
39
2.4 Controlling Cell Reference Behavior When Copying And Pasting Formulae (Use
Of The “$” Key) 40
2.4.a Using the “$” sign in different permutations and computations in a formula 42
2.5 Copying And Pasting Formulas From One Worksheet To Another 43
2.6 Pasting One Formula To Many Cells, Columns, Rows 44
2.7 Pasting Several Formulas To A Symmetric But Larger Range 44
2.8 Defining And Referencing A “Named Range” 44
Adding several named ranges in one step 47
Using a named range 48
2.9 Selecting All Cells With Formulas That Evaluate To A Similar Number Type 49
2.10 Special Paste Options 49
2.10.a Pasting only the formula (but not the formatting and comments) 49
2.10.b Pasting the result of a formula, but not the formula itself 49
2.11 Cutting And Pasting Formulae 50
Financial Analysis using Excel
2.11.a The difference between “copying and pasting” formulas and “cutting and
pasting” formulas 50
2.12 Creating A Table Of Formulas Using Data/Table 51
2.13 Saving Time By Writing, Copying And Pasting Formulas On Several Worksheets
Simultaneously 51
CHAPTER 3 PASTE SPECIAL 53
3.1 Pasting The Result Of A Formula, But Not The Formula 54
3.2 Other Selective Pasting Options 57
3.2.a Pasting only the formula (but not the formatting and comments) 57
3.2.b Pasting only formats 57
3.2.c Pasting data validation schemes 58
3.2.d Pasting all but the borders 58
3.2.e Pasting comments only 58
3.3 Performing An Algebraic “Operation” When Pasting One Column/Row/Range On
To Another 59
3.3.a Multiplying/dividing/subtracting/adding all cells in a range by a number 59
3.3.b Multiplying/dividing the cell values in cells in several “pasted on” columns
with the values of the copied range 60
3.4 Switching Rows To Columns 60
CHAPTER 4 INSERTING FUNCTIONS 62
4.1 Basics 62
4.2 A Simple Function 65
4.3 Functions That Need Multiple Range References 68
4.4 Writing A “Function Within A Function” 70
4.5 New Function-Related Features In The XP Version Of Excel 74
Searching for a function 74
4.5.a Enhanced Formula Bar 74
4.5.b Error Checking and Debugging 75
CHAPTER 5 TRACING CELL REFERENCES & DEBUGGING FORMULA ERRORS 77
5.1 Tracing the cell references used in a formula 77
5.2 Tracing the formulas in which a particular cell is referenced 79
5.3 The Auditing Toolbar 80
5.4 Watch window (only available in the XP version of Excel) 81
5.5 Error checking and Formula Evaluator (only available in the XP version of Excel)
82
5.6 Formula Auditing Mode (only available in the XP version of Excel) 85
5.7 Cell-specific Error Checking and Debugging 86
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Contents
5.8 Error Checking Options 87
CHAPTER 6 LOAN REPAYMENTS 90
6.1 Single Period Payment On Principal And Interest 91
6.1.a Relation between NPER and RATE when the payment period is less than one
year 91
Payment on Principal only (not on interest) 92
6.1.b Payment on interest only (not on principal) 92
6.1.c Payment on interest and principal 93
6.2 Loan Repayments (Cumulative Payment Over Periods) 94
6.2.a Cumulative repayment of principal 94
6.2.b Cumulative interest paid on a loan 95
Cumulative interest and principal paid on a loan between user-chosen
periods 96
Summary of loan repayment formulae 97
6.3 Related Functions: RATE & NPER 98
RATE (“Interest Rate per period of an Annuity”) 98
NPER (“Number of periods in an Investment”) 99
6.4 Mapping Between Simple And Compound Rates For The Same Annual Interest
100
EFFECT (“Effective Interest Rate”) 100
NOMINAL (“Nominal Interest Rate”) 100
CHAPTER 7 DISCOUNT CASH FLOWS 103
7.1 Present Values 103
PV 104
NPV 105
XNPV 106
7.2 Discount Cash Flow Analysis: Rates Of Return For An Investment/Project 107
IRR 107
MIRR 108
XIRR 109
7.3 Future Values 110
FV function 110
Rate versus NPER 111
FVSCHEDULE function 111
Difference between FV and FVSCHEDULE 112
7.4 Annuities — Comparative Summary Of Functions 112
7.5 Depreciation 114
7.5.a Depreciation of an asset over a single period 114
Straight-line and Sum-of-year’s depreciation methods 114
SLN function: Straight line depreciation 114
SYD function: Sum-of-years' digit method 114
7.5.b Depreciation of an asset over specified period using declining balance
methods 115
Fixed declining balance method 115
Variable declining balance method 116
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Financial Analysis using Excel
Allowing for a switch over between declining balances and straight line –
the VDB function 119
7.6 Risk Analysis— “If-Then” Scenarios 120
CHAPTER 8 SECURITIES FUNCTIONS 121
8.1 Information Requirements 121
8.2 Coupon-Related Functions 124
COUPDAYBS 124
COUPDAYS 125
COUPDAYSNC 126
COUPNCD 127
COUPPCD 128
COUPNUM 129
DURATION & MDURATION (Bond price’s response to changes in yield)
functions 130
8.3 Price versus Yield, & Interest Calculations 132
8.3.a Security that pays periodic interest (Coupon Paying Bond) 132
YIELD 132
PRICE 133
ACCRINT 133
Price and Yield for odd (long or short) first or last period Bonds 134
Odd First Period 134
Yield 135
Odd Last Period 136
Yield 136
8.3.b A discounted security which may pay redemption at maturity 138
DISC 138
PRICEDISC 139
YIELDDISC 140
8.3.c Security that pays interest at maturity 141
PRICEMAT 141
YIELDMAT 142
ACCRINTM 142
8.3.d Fully invested security 144
INTRATE 144
RECEIVED 144
8.4 Information Requirements For Loan Repayment And Securities Functions 145
8.5 T Bill Formulae 146
TBILLEQ function 146
TBILLPRICE function 147
TBILLYIELD function: Yield for a treasury bill (given market price or par
value) 149
CHAPTER 9 FUNCTIONS FOR BASIC STATISTICS 152
9.1 “Averaged” Measures Of Central Tendency 153
9.1.a AVERAGE 153
9.1.b TRIMMEAN (“Trimmed mean”) 154
9.1.c HARMEAN (“Harmonic mean”) 155
9.1.d GEOMEAN (“Geometric mean”) 156
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