Formulas and Functions

Chapter 13 Additional Examples and Topics 343
depr-period
Certain functions return the amount of depreciation for a specied period. depr-period is used to
specify the period.
depr-period is specied as a number representing the desired depreciation period using the same
time frame (for example, monthly, quarterly, or annually) as life.
Assume that you purchase a new digital photocopy machine for your oce. The purchase price of
the photocopy machine was $2,625 with tax. The vendor charged $100 to deliver and set it up. The
photocopy machine is expected to be used for 4 years, at which time it is expected to have a resale
value of $400. If you wished to determine the depreciation for the third year, depr-period would be 3.
eective-int-rate
Annuities and investments have an eective interest rate, which is calculated using the nominal
(stated or coupon) rate and the number of interest payments per year.
eective-int-rate is specied as a decimal number and must be greater than 0.
Assume that you own a security with a face value of $1,000,000 that pays annual interest of 4.5%
based on the face value, on a quarterly basis, which is an eective rate of approximately 4.58%.
eective-int-rate would be 0.0458. See also the description of nominal-rate and num-periods-year.
end-per
Certain functions return principal or interest for a series of specied payments. end-per is used to
indicate the last payment to be included in the value returned. See also the discussion of start-per.
end-per is specied as a number and must be greater than 0.
Assume that you are purchasing a home. The mortgage broker oers you a loan with an initial
balance of $200,000, a term of 10 years, an annual interest rate of 6.0%, xed monthly payments of
$1070.45, and a balance to be renanced at maturity of $100,000. If you wished to know the total
amount of interest paid in the third year, start-per would be 25 and end-per would be 36.
estimate
An estimate of the expected outcome is used by some nancial functions.
estimate is specied as a decimal number. For example, 13% is specied as 0.13. estimate can be
negative, if a loss is expected. If estimate is not specied, 0.10 is used as the default value.
If you do not have an idea as to the expected outcome and the default value does not result in
a solution, initially try a larger positive estimate. If this does not result in an outcome, try a small
negative estimate.
frequency
An investment may pay interest on a periodic basis. frequency is used to indicate how often interest
is paid.
frequency is the number 1, 2, or 4.
 A value of 1 indicates that the investment pays interest annually (once a year).
 A value of 2 indicates that the investment pays interest semiannually (twice per year).
 A value of 4 indicates that the investment pays interest quarterly (four times per year).
Assume that you are evaluating a corporate bond that pays interest quarterly. frequency would be 4.
Or assume you are evaluating a government bond that pays interest semiannually. frequency would
be 2.