Evaluating an investment is easy when you know it’s annual interest rate. If you don’t know an investment’s return, but you do know other facts about it, you can use the DISC function to find its discount rate. You can then compare the discount rate to the return from other investments to evaluate your options.
- [Instructor] Evaluating investment is easy…when you know its annual interest rate.…If you don't know the investment's return,…but you do know other facts about it,…you can use the DISC function to find its discount rate.…In this movie I will demonstrate…how to make that calculation,…and my sample file is DiscountRate_03_09.…You can find it in the Chapter03 folder…of your Exercise Files collection.…I have five piece of information.…The first is the Settlement date…that's at C3.…That's the date that I purchased the security.…
Next is Maturity date,…that is the date that the security reaches maturity,…stops earning interest,…and then we'll receive a payment about a week…or two weeks later.…Next is Price per $100, so face value.…So in other words, if I receive $100 in return,…what am I being asked to pay for?…Next is the Redemption value per $100 of face value.…Except for very unusual circumstances, that will be 100,…but you still need to put in that bit of information.…
And finally, Basis is how Excel looks at the calendar,…
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- Recall what the type argument is used to determine when using the PMT function.
- Identify what the M stands for in the ACCRINTM function.
- Name the accounting rules used by the AMORDEGRC function to assign a depreciation coefficient to an asset.
- Recall what internal rate of return generated by the IRR function should be measured against to determine if it is a good investment.
- List the three regular intervals that coupon bonds pay interest at.
- Determine the function that provides a more conservative bond evaluation compared to the DURATION function.
- Explain what the RECEIVED function shows.
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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