1, time value calculation of money:
Excel is widely used to calculate the time value of money, mainly used to calculate the present value, future value and internal rate of return of investment. For example, PV function can be used to calculate the present value of investment, FV function can be used to calculate the future value, and RATE function can be used to calculate the internal rate of return.
By inputting correct parameters, such as investment amount, interest rate, term, etc., Excel can quickly get the results of these indicators and provide important reference for investment decision-making.
In addition, Excel also provides the calculation of discount rate. For example, the discount rate of bonds can be obtained by using the disk function, which is of great significance to bond investment.
2. Calculation of risk reward:
Excel can be used to calculate risk and return, including CAPM, IWAC and so on. For example, the BETA function can be used to calculate the risk coefficient in the capital asset pricing model, and the RISKREL function can calculate the risk relative ratio.
By inputting correct parameters, such as risk-free interest rate, market risk premium and beta coefficient, Excel can quickly get the results of these indicators, which is helpful for us to better understand and evaluate the risks and benefits of investment.
3. Portfolio optimization:
Excel can be used for portfolio optimization, that is, by calculating the correlation matrix and covariance matrix between different assets, the optimal portfolio can be determined.
For example, CORREL function can be used to calculate the correlation coefficient between assets, and VAR function can calculate the variance of assets. Excel can quickly get the expected rate of return and risk level of portfolio by inputting the ratio and variance of various assets, which helps us to better select and allocate assets.
4. Capital budget:
Excel is also widely used in capital budgeting, that is, to determine the net present value (NPV) of a project by forecasting the future cash flow. For example, NPV function can be used to calculate the net present value of a project, and FV function can calculate the future cash flow.
By inputting correct parameters, such as cash flow, interest rate and term, Excel can quickly get the results of these indicators, which can help us evaluate the profitability and return on investment of the project.
In addition, Excel also provides other functions and tools related to capital budget, such as PPMT and IPMT, which can calculate the repayment amount of each installment under the average capital repayment method and the equal principal and interest repayment method respectively.