Posted by : Deepak Vasudevan Saturday, August 05, 2006

Microsoft Excel -- Quick Reckoner for Financial Calculations

Most of us would have encountered piquant situations while planning to avail personal loans from financial institutions. While the bank gives a full details of the loan, the amortization schedules etc, it would be better that we also have hand-calculate and cross verify the details. The calculation process is not simple and particularly assumes mammoth complexities in the case of long term loans.

Fortunately, there is a simple but generic tool that lies very much within Microsoft Excel to help ease out this situation and greatly help us.

  1. Amotization Schedule
    1. Launch Microsoft Excel.
    2. Right click on the bottom tab 'Sheet 1'.
    3. Click on the tab 'Spreadsheet Solutions'.
    4. You can now select 'Amortization Schedule'.
    5. Fill out the steps and Microsoft Excel would calculate the rest.
  2. Principal Component in EMI
    1. Launch Microsoft Excel and from Insert -> Function, choose the category 'Financial'
    2. Choose 'PPMT' as the function name.
    3. Fill out the fields.
    4. Instead of PPMT, if you can choose IPMT, you can get the Interest component of the loan.

I hope this would be of tremendous significance to any user before availing a loan from any financial institution.

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