The Mathematics of Money

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Learning Objectives

LO 1 Create basic spreadsheets as tools for fi nancial

calculations.

LO 2 Use spreadsheets to fi nd future values of annuities

or series of irregular payments.

LO 3 Create amortization tables using spreadsheets.

LO 4 Use spreadsheets as a tool to solve annuity and

other fi nancial problems for values that cannot

be readily determined with formulas and algebra.

Chapter Outline

5.1 Using Spreadsheets: An Introduction

5.2 Future Values with Spreadsheets

5.3 Amortization Tables with Spreadsheets

5.4 Solving Annuity Problems with Spreadsheets

Spreadsheets

5.1 Using Spreadsheets: An Introduction

The tools we developed in Chapter 4 allow us to work mathematically with all sorts of

streams of payments. But if there are a lot of extra or missing payments, or a lot of changes

in the amount of the regularly scheduled payments, these approaches can get awfully

tedious. Spreadsheet programs provide an alternative way to handle these problems. As

we will also see in this chapter, spreadsheets are a very useful tool for a wide range of

business and fi nancial calculations.

The most commonly available spreadsheet program on the market today is Microsoft

Excel. There are alternatives, but other spreadsheets are similar enough that you can adapt

to them quickly if you know how to use Excel. This section will discuss the use of spread-

sheets for fi nancial calculations, and demonstrate how this can be done, using Excel.

The Layout of a Spreadsheet

A spreadsheet is a rectangular arrangement of individual packets of information. Each

of these packets is called a cell. A cell can contain words (text), numbers, or formulas.

“A wise man should have money in his

head, but not his heart.”

—Jonathan Swift

CHAPTER

5