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In the previous movie, I showed you how to calculate the interest rate behind an investment. In this movie I'll show you how to discover the amount you'll receive when you know the length of the investment and its interest rate. To make that calculation you will use the RECEIVED function. For the RECEIVED function you need to know five things. The first is the settlement date, which I have in cell C4 and that is the date that you gain control of the investment. Next is the maturity date and the maturity date is the date that final payment is due to you and the investment ends.
Then you have the investment. That's the amount you pay to get into the investment. Next you have the discount rate in C7 and the discount rate is the interest rate on the investment. Then next in cell C8 we have the basis, and basis is the way that you calculate days in a month and a year. We have it set value 0 which is the default and that is the North American standard which uses 30 day months and a 360 day a year. There are other ways to count including actual which is option number 1 and that has all of the days in the year and all of the days in a month.
So in a regular year you would have 365 days with 28 days in February and then in a leap year you would have 366 days with 29 days in February. But in this case, we'll go with the default and stay with option 0. So now I am going to click in cell C11 to create our formula to find the full value at maturity. So I'll type equal and then we are going to use the RECEIVED function, received(, and then we can start typing in the cell references for the arguments.
So we have C4 for the settlement date, C5 for the maturity date, then type a comma, the investment value is in cell C6, comma, discount rate C7, comma, and then basis is in C8 and that's our last argument. So type a right parenthesis to close out. And then I'll press Tab so I don't scroll down. So given this investment and a discount rate of 4.825% we see that the received value is $144,890. So it's just under 145,000.
So just to see how this investment value would change if you had a higher interest rate we will change 4.825% in cell C7 to 5 and a quarter or 5.25%. So if that change in place, press Enter and we see that the received value goes up by almost $13,000, which is quite a substantial improvement. So when you want to find the amount you receive from an investment or you know the term, starting price, and discount rate, use the RECEIVED function.
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