[PLUG-TALK] Excel Formula

Rich Shepard rshepard at appl-ecosys.com
Tue Jan 23 04:05:47 UTC 2007


On Mon, 22 Jan 2007, M. Edward (Ed) Borasky wrote:

> Yeah, the formula is there ... I wonder how they actually do the solution,
> though, and how accurate it is. One could, of course, grab an HP-12C and
> compare -- when in doubt, assume the HP is right and Excel is wrong. :)

   The description includes concepts such as a loan: you have a final amount
some time in the future, a fixed interest rate for the duration, and a given
number of periods. How much money must you have now to have a specified
amount at the future time?

   However, their examples (text only) are for fixed payments. The way they
express the relationships, if payments are zero, the entire middle term
drops out and the formula reduces to (future value) / (1 - interest
rate)^number of periods. According to Wikipedia (look up Present Value),
that's for simple interest, not an annuity with compound iterest.

> I knew there was a reason you took this to PLUG-TALK. Can you tell I have
> almost no confidence in calculations done by Excel? :)

   Well, I think that spatial statistics, computational geometry, and fuzzy
set theory and logic are easy to understand, but the explainations of these
financial formulas are really difficult for me to understand. Guess that's
why I'm an ecologist and not a finance MBA, eh?

Rich

-- 
Richard B. Shepard, Ph.D.               |    The Environmental Permitting
Applied Ecosystem Services, Inc.        |          Accelerator(TM)
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