One of the more conservative investment strategies available is to purchase an instrument such as a certificate of deposit or fixed-rate annuity that enables investors to trade lower risk for a relatively low, but known, rate of return. You can evaluate this type of investment using the future value, or FV, function.
- One of the more common investment strategies available…is to purchase an instrument,…such as a certificate of deposit…or a fixed rate annuity that enables you…to trade lower risk for a relatively low…but known rate of return.…You can evaluate this type of investment…using the future value or FV function.…I'll show you how to use that function,…and my sample file is FV0301,…which you can find in the chapter three folder…of the exercise files collection.…When you want to calculate the…future value of an investment,…that is how much something will be worth…after the investment has run its course,…and interest and other payments have been accrued,…then you use the FV function.…
That takes the following five arguments,…and the first three are required.…The last two are optional.…The first is the annual percentage rate.…You'll often divide this by 12…in case of monthly compounding,…the number of periods, which in this case…is the number of years, or five,…payment, which is the periodic payment…that you put into the investment,…
- Define NPER.
- Determine the appropriate method of depreciation to use on tax returns.
- Recall which function is used to evaluate a fixed-rate investment or an annuity that makes periodic payments to the beneficiary.
- Identify the term for the rate of return earned from a zero-risk investment.
- Explain the purpose of the XNPV function.
- Recognize the type of bond that pays interest before it matures.
- Name three arguments needed to use the TBILLYIELD function.
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. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 24s
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