TIME VALUE
OF MONEY
IMPLEMENTING EXCEL FINANCIAL FUNCTIONS
IN SAS USING PROC FCMP
PRESENTATION SYNOPSIS
1. Review of elementary financial concepts
2. Excel functions and their SAS equivalents
3. Using the Gauss-Newton algorithm in SAS
CASH FLOW DIAGRAM
FIVE ELEMENTS OF
CASH FLOW DIAGRAM
1. Present value PV
2. Number of periods NPER
3. Rate of return RATE
4. Periodic payment PMT
5. Future value FV
PRESENT VALUE
NUMBER OF PERIODS
RATE OF RETURN
PERIODIC PAYMENT
FUTURE VALUE
FINANCIAL FUNCTIONS
IN EXCEL
Unknown
variable
Excel function
Present
value
=PV(rate,
nper, pmt, fv)
Number
of periods
=NPER(rate,
pmt, pv, fv)
Rate
of return
=RATE(
nper, pmt, pv, fv)
Period
ic payment
=PMT(rate,
nper, pv, fv)
Future value
=FV(rate,
nper, pmt, pv)
FINANCE FUNCTION
IN SAS
Unknown
variable
Excel function
SAS FINANCE function call
Present
value
=PV(
rate,nper,pmt,fv)
=FINANCE(‘PV’,
rate,nper,pmt,fv)
Number
of periods
=NPER(
rate,pmt,pv,fv)
=FINANCE(‘NPER’,
rate,pmt,pv,fv)
Rate
of return
=RATE(
nper,pmt,pv,fv)
=FINANCE(‘RATE’,
nper,pmt,pv,fv)
Period
ic payment
=PMT(
rate,nper,pv,fv)
=FINANCE(‘PMT’,
rate,nper,pv,fv)
Future value
=FV(
rate,nper,pmt,pv)
=FINANCE(‘FV’,
rate,nper,pmt,pv)
CASH FLOW DIAGRAM
Cash Flow Element
Future Value Calculation
Periodic payment
Periodic payments
Final payment
INITIAL LOAN
COMPOUND FUNCTION
Cash Flow Element
SAS
expression
Initial loan
=COMPOUND(
pv, fv, rate, nper)
PERIODIC PAYMENTS
SAVING FUNCTION
Cash Flow Element
SAS
expression
Periodic payment
=SAVING(
fv, pmt, rate, nper)
FINAL PAYMENT
CASH FLOW DIAGRAM
Cash Flow Element
SAS
expression
Initial
loan
=COMPOUND(
pv, ., rate, nper)
Periodic payments
=SAVING(.,
pmt, rate, nper)
Final payment
=
pmt
FCMP PROCEDURE:
FUNCTION STATEMENT
FCMP PROCEDURE:
SOLVE FUNCTION
FCMP PROCEDURE:
SOLVE FUNCTION
FINAL TESTING
Unknown variable
Actual value FINANCE
function
FCMP
functions
Present
value $50,000 $50,000 $50,000
Number
of periods 5 5 5
Rate
of return 2% 2% 2%
Period
ic payment $10,000 $10,000 $10,000
Future value
$3,163.64 $3,163.64
QUESTIONS?
