Difference between revisions of "Documentation/How Tos/Calc: DURATION function"
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<tt>'''DURATION(10%; 100; 121)'''</tt> | <tt>'''DURATION(10%; 100; 121)'''</tt> | ||
: returns <tt>'''2'''</tt>. $100 invested at a 10% compounded annual rate is worth $110 next year and $121 in two years time. | : returns <tt>'''2'''</tt>. $100 invested at a 10% compounded annual rate is worth $110 next year and $121 in two years time. | ||
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| + | === Issues: === | ||
| + | * Calc's <tt>'''DURATION'''</tt> function is implemented as <tt>'''G_DURATION'''</tt> in Gnumeric, and is <u>not</u> implemented in Excel. | ||
| + | * The <tt>'''DURATION'''</tt> function as implemented in Gnumeric and Excel (Macaulay duration) is implemented as <tt>'''DURATION_ADD'''</tt> in Calc. | ||
| + | * The inexactness for fractional periods arises because interest is calculated linearly during a period. For example, $100 at 10% is worth $105 in half a year, yet <tt>'''DURATION(10%; 100; 105)'''</tt> does <u>not</u> return exactly 0.5. This may be of more theoretical than practical importance. | ||
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{{Documentation/SeeAlso| | {{Documentation/SeeAlso| | ||
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* [[Documentation/How_Tos/Calc: Functions listed alphabetically|Functions listed alphabetically]] | * [[Documentation/How_Tos/Calc: Functions listed alphabetically|Functions listed alphabetically]] | ||
* [[Documentation/How_Tos/Calc: Functions listed by category|Functions listed by category]]}} | * [[Documentation/How_Tos/Calc: Functions listed by category|Functions listed by category]]}} | ||
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Revision as of 10:12, 2 March 2009
DURATION
Returns the number of periods needed for an investment to reach a certain value.
Syntax:
DURATION(rate; present_value; future_value)
- rate: the interest rate per period that will apply to the investment.
- present_value: the value of the investment now.
- future_value: the desired value of the investment in the future.
- DURATION returns an estimate of the number of periods required to turn present_value into future_value at a constant interest rate of rate, compounded each period.
- It solves the equation:
- present_value * (1 + rate)duration = future_value,
- giving a result:
- DURATION(rate; present_value; future_value) = LOG(future_value/present_value; 1 + rate).
- The result is exact for whole periods, and approximate for partial periods.
Example:
DURATION(10%; 100; 121)
- returns 2. $100 invested at a 10% compounded annual rate is worth $110 next year and $121 in two years time.
Issues:
- Calc's DURATION function is implemented as G_DURATION in Gnumeric, and is not implemented in Excel.
- The DURATION function as implemented in Gnumeric and Excel (Macaulay duration) is implemented as DURATION_ADD in Calc.
- The inexactness for fractional periods arises because interest is calculated linearly during a period. For example, $100 at 10% is worth $105 in half a year, yet DURATION(10%; 100; 105) does not return exactly 0.5. This may be of more theoretical than practical importance.
