How to use Microsoft Excel for financial calculations?
Microsoft Office Excel is a great computer program that is widely used throughout the financial industry. Excel is an invaluable tool in Finance and Accounting. Of course professionals also use special financial calculators. But a financial calculator can be expensive for students. It is not intuitive to use and unless they become investment bankers or realtors, most students will never use it after finishing the financial course. Fortunately, it is very easy to create a financial calculator for free if you have Excel on your computer. In fact, an Excel calculator can do much more than a dedicated financial calculator. Another advantage is the fact that if you learned how to use financial functions of Excel you will be able also to use a special financial calculator should the need arise. Below is a short introduction of how to start using MS Excel for financial calculations.

Inserting Functions
Excel comes with a wide array of functions that can easily be inserted into a spreadsheet. Adding a function is as easy as clicking on the "Insert Function" button on the top tool bar. Insert Function Button

If you don't see the "Insert Function" button on your tool bar, you can easily add it by clicking: Tools > Customize > Commands > Find and click on Insert in the left-hand scroll-down menu. Then, find "Insert Function" in the right-hand scroll-down menu and click and drag it to your tool bar.

Clicking on the "Insert Function" button allows you to search for a function by typing a brief description of what you want, or by category. For example, if you click on the "Function" icon, the following window will be displayed:

Here is this window:

Adding a particular function to your spreadsheet is then as simple as following the on-screen commands, but if you are ever in doubt, press the F1 key on your keyboard to access Excel's "Help" program. Here is what you will see if you choose PV function:

List of functions which we will be using:

Financial FV PV PMT RATE NPER NPV IRR Maths & Trig EXP POWER

Future Value Present Value Payment for Annuity or Loan Interest Rate Number of periods Present Value of a stream of cash flows Internal Rate of Return Logarithm (needed for continuous compounding) Power (needed for Effective Annual Interest Rate)

I have prepared for you a special file “Excel Financial Calculator” (available via Moodle). Please download it before the course begins. We will work with this file in class. I will give you all the necessary explanations and instructions during our face-to-face sessions.

If you are fond of Excel J and keen to learn more, you may also read the following sources:

http://www.tvmcalcs.com/calculators/excel_tvm_functions/excel_tvm_functions_page1 http://www.wikihow.com/Create-an-Excel-Financial-Calculator http://www.investopedia.com/articles/financialcareers/07/excel_tips.asp#ixzz1ZExiD17y

Olga Kandinskaia