Financial functions

[Steffen]

I have the following data. I do an investment (give a loan) of 1.000.000
Euro. The rate I want is 10%. The period is 5 years. What functions should I
use to calculate the sum the customer should pay me after 5 years. And if the
customer should pay me in advance what would the sum be then.

I have tried myself but I am not sure what to do. I can use the ordinary
functions if payment is regular (per month, year etc) but if the payment is
in the beginning or at the end of a 5 year period I do not know how to solve
the problem.

Steffen

 

[Stan Brown]

Sun, 9 Dec 2007 02:07:01 -0800 from Steffen

I have the following data. I do an investment (give a loan) of 1.000.000
Euro. The rate I want is 10%. The period is 5 years. What functions should I
use to calculate the sum the customer should pay me after 5 years. And if the
customer should pay me in advance what would the sum be then.

This depends on the method of accruing or calculating interest. It
should be stated in the loan documents, but if it's not there then
national law probably specified.

For example, interest might be accrued annually on the first day or
the year. In that case, the amount due is the same on the first
through 365th day of each year. Or it might be accrued on the first
or last day of each month, Or it might be accrued and compounded
daily, or accrued daily but compounded monthly, or ...

Since a million euro are involved, you need to check the loan
documents and applicable law carefully.

 

[Fred Smith]

The future value of your loan is:

=fv(10%,5,0,1000000)
=1,610,510 Euro

If the customer pays you in advance, for example, after 3 years, just put the
period into the formula, as in:

=fv(10%,3,0,1000000)
=1,331,000

FV will also accept non-integer periods, so if he pays you back after 3 years
and 8 months, use a period of 3.75 years.

 

[Steffen]

Hi Fred!

Thank you. It was unclear for me but as I understand your answer I can use
zero in payment and 5 which will represent yearperiod.

Best regards

Steffen

"Fred Smith" skrev:

 

[Fred Smith]

As you stated in your post, there are no payments until the end, so the PMT
amount is zero. And again, as you said, the term is 5 years, so NPER is 5.