Basic Excel Math Formulas: Add/Subtract/Multiply/Divide
Using mathematical operators to calculate percentages (Excel Formulas example)
Consider the following situation:
You are offered a loan of $5,000 and asked to return it in 12 monthly installments of $588.
How much money will you be required to pay back?
What is the yearly percentage of interest you will be paying?
These questions are easily solved with Excel.
We'll start by typing in the values we already know:
To define the formula that calculates the total payment amount, we simply create a formula that multiples the number of payments by the monthly payment amount:
I strongly advise you to recreate this example in Excel. Merely reading this guide is not nearly as helpful as recreating the examples shown here in Excel and playing around with them.
If you aren't sure how to enter formulas into Excel, skip ahead to the next chapter titled 'How to insert & edit formulas'
To calculate the yearly interest rate (in percentages), we'll create two additional formulas.
The first one will calculate the percentage of the 'pay back amount' out of the 'loan amount'. This is done by dividing the 'total payment amount' with the 'original loan amount' and multiplying by 100, as seen here:
We can already see that will be paying back more than 140% of the original loan ... ouch!
To complete the calculation of the yearly interest rate, we simply need to subtract 100 from the number we already have: