Apple iWork '09 - Manual (Page 345)

Chapter 13 Additional Examples and Topics 345
num-periods-year
The calculation of the effective and nominal interest rates is based on the number of interest
compounding periods per year. num-periods-year is used to specify the number of periods.
num-periods-year is specified as a number and must be greater than 0.
Assume that you have purchased a certificate of deposit that pays interest annually, compounded
quarterly. If you wanted to determine the effective interest rate, num-periods-year would be 4. See
also the description of effective-int-rate and nominal-rate.
par
The par value of a security is generally its face or maturity value.
par is specified as a number, usually formatted as currency.
par is often a number like 100, 1,000, or 1,000,000.
Assume that you are considering purchasing a corporate bond. The prospectus for the bond states
that each bond will be issued with a face and maturity value of $1,000. The $1,000 would be the par
value of the bond.
payment
A payment is a fixed, periodic cash flow received or paid over an investment or loan period.
payment is specified as a number, usually formatted as currency. Since payment is a cash flow,
amounts received are specified as positive numbers and amounts paid are specified as negative
numbers.
payment often includes both principal and interest elements, but does not usually include other
amounts.
Assume that there is a townhouse that you plan to purchase, rent out for a period of time, and then
resell. The amount of the monthly mortgage payment could be a payment and would be negative.
The rent payment received each month could also be a payment and would be positive.
period
Certain functions return a principal or interest value for a given period. period is used to indicate the
desired period.
period is specified as a number and must be greater than 0.
Assume that you are purchasing a home. The mortgage broker offers you a loan with an initial
balance of $200,000, a term of 10 years, an annual interest rate of 6.0%, fixed monthly payments of
$1070.45, and a balance to be refinanced at maturity of $100,000. If you wished to know the amount
of interest in the first payment of the third year, period would be 25, since payments are monthly.
periodic-discount-rate
The discount rate is the interest rate representing the desired yield used to value (or discount) a
series of cash flows.
periodic-discount-rate is specified as a decimal (for example, 0.08) or delimited with a percent sign (for
example, 8%). It is specified using the same time frame as the time frame used for the cash flows. For
example, if the cash flows are monthly and the desired annual discount rate is 8%, periodic-discount-
rate must be specified as 0.00667 or 0.667% (0.08 divided by 12).
Assume that you are evaluating the possible purchase of a business. As part of your evaluation, you
determine the expected monthly cash flows from the business along with the requested purchase
price and estimated future resale price. You decide, based on alternative investment opportunities
and risk, that you will not invest unless the net cash flows yield at least an 18% annual interest rate.
periodic-discount-rate would be 0.015 (0.18 / 12 as specified cash flows are monthly).