Mastering Financial Mathematics in Microsoft Excel: A practical guide to business calculations (The Mastering Series) PDF
Preview Mastering Financial Mathematics in Microsoft Excel: A practical guide to business calculations (The Mastering Series)
Mastering Financial Mathematics ® in Microsoft Excel A01_DAY7506_03_SE_FM.indd 1 07/13/15 9:57 AM A01_DAY7506_03_SE_FM.indd 2 07/13/15 9:57 AM Mastering Financial Mathematics in ® Microsoft Excel A practical guide for business calculations Third Edition AlAsTAir l. DAy A01_DAY7506_03_SE_FM.indd 3 07/13/15 9:57 AM Pearson education Limited edinburgh Gate Harlow cm20 2Je tel: +44 (0)1279 623623 Fax: +44 (0)1279 431059 Website: www.pearsoned.co.uk First published in Great Britain in 2005 second edition 2010 Third edition 2015 (print and electronic) © Pearson education Limited 2005 © systematic Finance Limited 2010, 2015 (print and electronic) isBn: 978-1-292-06750-6 (print) 978-1-292-06752-0 (PdF) 978-1-292-06751-3 (etext) 978-1-292-06753-7 (ePub) British Library cataloguing-in-Publication data a catalogue record for this book is available from the British Library Library of congress cataloging-in-Publication data a catalog record for this book is available from the Library of congress the print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the united Kingdom should be obtained from the copyright Licensing agency Ltd, saffron House, 6–10 Kirby street, London ec1n 8ts. the ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permit- ted by applicable copyright law. any unauthorised distribution or use of this text may be a direct infringe- ment of the author’s and the publisher’s rights and those responsible may be liable in law accordingly. all trademarks used herein are the property of their respective owners. the use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. microsoft product screen shots reprinted with permission from microsoft corporation. Pearson education is not responsible for the content of third-party internet sites. 10 9 8 7 6 5 4 3 2 1 19 18 17 16 15 Print edition typeset in Garamond 11.5/13.5pt by 76 Printed in malaysia note tHat anY PaGe cross reFerences reFer to tHe Print edition A01_DAY7506_03_SE_FM.indd 4 07/13/15 9:57 AM Contents Acknowledgements x About the author xi Conventions xii Overview xiii How to use this book xv Warranty and disclaimer xvi 1 Introduction 1 overview 3 common excel errors 4 systematic design method 6 auditing 10 summary 14 2 Basic financial arithmetic 15 simple interest 17 compound interest 21 multiple payments 27 differing interest rates 29 nominal and effective rates 32 continuous discounting 33 conversions and comparisons 35 exercise 36 summary 36 3 Cash flows 37 net present value 39 Varying interest rates 42 internal rate of return 43 XnPV and Xirr 46 XnPV periodic example 47 v A01_DAY7506_03_SE_FM.indd 5 07/13/15 9:57 AM Contents modified internal rate of return 48 exercise 50 summary 50 4 Bonds calculations 51 description 53 cash flows 56 Zero coupons 58 Yield 59 Yield to call 59 Price and yield relationship 61 Yield curve pricing 61 other yield measures 63 Yield measures 65 exercise 67 summary 68 5 Bond risks 69 risks 71 duration 74 convexity 78 comparison 83 exercise 85 summary 86 6 Floating rate securities 87 Floating rates 89 characteristics of interest rate securities 90 Yield evaluation 92 coupon stripping 97 exercise 98 summary 99 7 Amortisation and depreciation 101 amortisation 103 Full amortisation 105 delayed payments 105 sum of digits 108 straight line and declining balance depreciation 109 uK declining balance method 111 double declining balance depreciation 112 vi A01_DAY7506_03_SE_FM.indd 6 07/13/15 9:57 AM Contents French depreciation 113 exercise 115 summary 116 8 Swaps 117 definitions 119 How swaps save money 122 advantages of swaps 123 terminating interest rate swaps 124 implicit credit risk 125 Worked single currency swap 125 Valuation 126 cross currency swap 128 Worked example 129 swaptions 130 exercise 132 summary 132 9 Forward interest rates 133 definitions 135 example forward rates 135 Hedging principles 138 Forward rate agreement 139 Yield curves 142 exercise 146 summary 146 10 Futures 147 Futures market 149 terminology 150 Benefits 151 clearinghouse operation 152 Bond futures 153 Hedging mechanisms 153 Hedging example 1 155 Hedging example 2 157 exercise 160 summary 160 vii A01_DAY7506_03_SE_FM.indd 7 07/13/15 9:57 AM Contents 11 Foreign exchange 161 risk 163 spot rates 165 Longer dates 169 equivalence 170 comparisons and arbitrage 172 exercise 173 summary 173 12 Options 175 description 177 terminology 178 underlying asset 180 call options 180 Put options 184 example 186 covered call 188 insurance using a stock and a long put 190 Pricing models 190 Black–scholes model 192 call put parity 195 Greeks 196 Binomial models 199 comparison with Black–scholes 202 exercise 206 summary 206 13 Real options 207 real options 209 Black–scholes model 210 Binomial model 211 exercise 213 summary 214 14 Valuation 215 Valuation methods 217 assets 218 market methods 219 multi-period dividend discount models 221 Free cash flow valuation 223 adjusted present value 232 viii A01_DAY7506_03_SE_FM.indd 8 07/13/15 9:57 AM Contents economic profit 235 exercise 238 summary 238 15 Leasing 239 economics of leasing 241 interest rates 243 classification 244 amortisation 249 accounting 250 settlements 251 Lessor evaluation 254 Lessee evaluation 258 exercise 260 summary 261 16 Basic statistics 263 methods 265 descriptive statistics 265 Probability distributions 278 sampling/central Limit theorem 285 Hypothesis testing 290 correlation and regression 301 Linest function 310 exercise 312 summary 312 Appendices 313 1 Exercise answers, functions list, software installation and licence 315 2 An introduction to Microsoft® Office 351 index 367 ix A01_DAY7506_03_SE_FM.indd 9 07/13/15 9:57 AM
The list of books you might like
