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 this calculation, you’ll use the information I just listed and the RECEIVED function.
- [Instructor] When you make an investment…in which you are fully vested, that is,…you'll receive the entire proceeds of the investment,…you can calculate the economic value of that investment…using several different arguments.…In this movie, I will show you how…to use the received function to calculate…the economic value of an investment.…The sample file is ValueAtMaturity_05_03…and you can find it in the chapter five folder…of your exercise files collection.…The scenario I'm presenting here is that…you have a security such as a bond…and you have a settlement date,…in this case we're assuming you purchased it…on July 13, 2016.…
The maturity date of December 5, 2019.…That you're investing $100,…and that the discount rate, that is,…the amount that you could get investing…with almost zero risk, is 5.75%.…And also using a basis argument of one,…that all interest is compounded at the end of a period.…So let's click in cell C9…and create the formula that we need to use.…
So I'll type equal and the function is received.…
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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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