Cost-of-living Index 1951:10=100

Jan. Feb. Mar. Apr. May June July Aug. Sept.

2016 1898 1900 1907 1913 1912 1913 1912

2015 1897 1902 1908 1908 1907 1907 1902 1906 1908
2014 1900 1905 1909 1912 1907 1909 1907 1909 1920
2013 1870 1881 1889 1892 1892 1891 1891 1888 1894
2012 1840 1850 1857 1863 1864 1865 1861 1865 1872
2011 1783 1794 1804 1807 1808 1813 1808 1815 1823
2010 1729 1735 1744 1749 1747 1751 1742 1749 1757
2009 1732 1733 1734 1734 1731 1735 1724 1729 1732
2008 1695 1703 1719 1721 1730 1736 1734 1742 1750
2007 1632 1642 1655 1663 1661 1663 1662 1664 1671
2006 1595 1607 1612 1621 1623 1624 1620 1626 1629
2005 1575 1585 1591 1595 1591 1595 1591 1595 1604
2004 1572 1581 1576 1576 1578 1577 1575 1579 1585
2003 1569 1580 1584 1582 1580 1578 1570 1572 1579
2002 1548 1551 1559 1565 1569 1566 1563 1563 1568
2001 1514 1522 1529 1536 1548 1550 1542 1544 1552
2000 1466 1476 1485 1490 1497 1504 1505 1507 1519
1999 1434 1437 1441 1451 1455 1454 1452 1453 1457
1998 1427 1426 1429 1436 1435 1438 1435 1437 1441
1997 1398 1400 1405 1412 1415 1417 1417 1420 1423
1996 1390 1394 1396 1398 1401 1401 1400 1397 1400
1995 1383 1387 1388 1389 1390 1394 1393 1391 1393
1994 1357 1362 1365 1368 1368 1382 1382 1385 1388
1993 1354 1359 1360 1365 1366 1364 1361 1359 1362
1992 1320 1323 1327 1332 1333 1336 1334 1332 1337
1991 1283 1290 1291 1296 1302 1301 1300 1302 1304
1990 1223 1228 1232 1239 1245 1248 1250 1256 1262
1989 1137 1143 1156 1167 1171 1182 1181 1182 1195
1988 1075 1078 1084 1092 1101 1107 1106 1109 1119
1987 1035 1039 1044 1049 1050 1053 1053 1056 1060
1986 999 1003 1005 1009 1013 1018 1019 1021 1021
1985 955 959 968 973 983 985 986 987 989
1984 898 902 908 914 924 926 929 933 939
1983 830 834 839 849 860 871 875 876 881
1982 767 771 780 786 799 800 806 804 806
1981 693 699 708 717 727 731 734 736 745
1980 611 620 626 638 645 648 651 660 669
1979 560 567 571 576 578 582 585 588 593
1978 526 532 533 536 544 544 545 547 551
1977 476 482 489 493 500 506 510 518 520
1976 426 432 436 440 441 442 450 456 460
1975 364 369 375 383 387 388 394 399 405
1974 305 314 317 324 328 329 335 340 348
1973 265 267 269 272 277 280 288 292 295
1972 242 245 247 251 253 254 256 257 259
1971 228 229 231 232 233 237 239 241 243
1970 220 221 221 222 222 222 223 223 224
1969 215 215 214 216 216 217 217 217 218
1968 205 207 210 211 211 213 213 213 214
1967 191 192 192 193 193 194 195 195 197
1966 181 181 182 183 184 184 185 186 187
1965 175 175 176 177 177 178 179 179 179
1964 164 165 167 169 170 170 170 171 172
1963 150 151 151 153 153 153 154 154 156
1962 143 143 144 145 146 146 148 148 148
1961 140 140 140 140 140 140 140 140 140
1960 136 136 137 138 138 138 139 138 138
1959 133 133 133 132 133 133 133 133 134
1958 129 130 130 132 133 132 132 132 132
1957 120 120 120 121 122 122 124 125 126
1956 104 107 108 108 110 110 111 112 113
1955 98 98 98 99 99 99 99 100 100
1954 104 104 103 104 104 103 104 104 104
1953 102 103 103 103 103 103 103 103 103
1952 102 101 101 101 101 101 101 101 101
1951 . . . . . . . . .
Oct. Nov. Dec. Annual
average

1911 1908 1906 1906

1916 1913 1910 1910
1897 1894 1901 1890
1875 1869 1871 1863
1827 1829 1828 1812
1764 1768 1777 1751
1723 1725 1726 1730
1750 1741 1736 1730
1677 1680 1678 1662
1633 1634 1635 1622
1603 1598 1600 1594
1590 1583 1584 1580
1577 1575 1577 1577
1572 1568 1567 1563
1549 1543 1542 1539
1520 1519 1517 1501
1460 1460 1466 1452
1441 1438 1437 1435
1426 1425 1425 1415
1402 1398 1399 1398
1393 1389 1387 1390
1389 1385 1383 1376
1364 1362 1361 1361
1342 1344 1340 1333
1306 1307 1313 1300
1266 1266 1264 1248
1199 1199 1205 1177
1120 1123 1132 1104
1062 1062 1063 1052
1024 1024 1025 1015
990 991 992 980
944 944 945 925
883 891 890 865
809 812 823 797
752 752 755 729
676 682 686 651
596 601 604 583
554 557 556 544
522 524 525 506
465 468 469 449
411 415 418 392
351 353 354 333
297 299 303 284
260 262 262 254
243 244 245 237
224 225 225 223
218 218 218 217
215 215 215 212
198 202 203 195
188 189 189 185
180 180 180 178
173 173 174 170
158 158 158 154
150 150 150 147
141 142 142 141
139 140 140 138
136 136 136 134
132 133 133 132
127 127 128 124
113 118 118 111
101 101 101 100
104 98 98 103
104 103 102 103
102 102 102 101
100 100 100 .
Compound interest calculation formulas

Basic compound interest formula: FV function

(FV = future value = maturity value)
In all cases,
Formula for principal in compound interest (discounting): PV function if the source tax is given,
use net interest rate.
(PV = present value = principal)
𝑅_𝑛=𝑅×(1−𝑡𝑎𝑥)
Notice: there is no other way
Formula for interest rate in compound interest: RATE function in compound interest!

Formula for interest time in compound interest: NPER function

x is given,
t rate.

𝑎𝑥)
no other way
terest!
Basic Exercises

Answers
1. 10,215.73 €
2. 5,309.84 €
3. 14,855.23 €
4. Option A ( 76192,24 < 77255,11)
5. -12.68%
6. 4 (exact answer: 3,984702…)
7. 8 (exact answer: 7,900111…)
8. 33,098.84 €
9. 4.09%
10. 3.526 %
11. 0.75%
12. 8,633.75 €
Deposit of 9200 € grows interest at 0.75 % interest rate. The source tax rate is 30 %. Calculate the maturity value af

Principal 9,200.00 € Nominal interest rate 0.75%

Rate (net) 0.525 % =H3*(1-H4) Source tax 30%
Time in years 20
Maturity value 10,215.73 € =FV(C4;C5;;-C3)
ulate the maturity value after 20 years.
Jason deposits his annual bonuses at the end of each year into a savings account that has 1,8 % interest rate.
He has received the following bonuses:
Year Amount
2012 2,500.00 € There are two solution options given.
2013 1,200.00 € Scroll down to see the other one.
2014 1,400.00 €
There was no bonuses given in 2015 or 2016.
Calculate the amount that he has saved by the end of year 2016.
The source tax is 30 %.

IDEA: Each deposit's maturity value (FV) can be calculated separately.

Deposit at the end of 2012:

Principal 2,500.00 € =C4 Nominal interest rate
Rate (net) 1.26% =G14*(1-G15) Source tax
Time in years 4 =2016-B4
Maturity value 2,628.40 € =FV(C15;C16;;-C14)

Deposit at the end of 2013:

Principal 1,200.00 € =C5
Rate (net) 1.26% =C15
Time in years 3 =2016-B5
Maturity value 1,245.93 € =FV(C22;C23;;-C21)

Deposit at the end of 2014:

Principal 1,400.00 € =C6
Rate (net) 1.26% =C22
Time in years 2 =2016-B6
Maturity value 1,435.50 € =FV(C29;C30;;-C28)

The total saving 5,309.84 € =SUM(C31;C24;C17)

This can be done also by going forward only a year at a time and adding the new bonus on the amoung:

Deposit at the end of 2012:

Principal 2,500.00 € =C4 Nominal interest rate
Rate (net) 1.26% =G38*(1-G39) Source tax
Time in years 1
Maturity value 2,531.50 € =FV(C39;C40;;-C38)

Deposit at the end of 2013:

Principal 3,731.50 € =C41+C5
Rate (net) 1.26%
Time in years 1
Maturity value 3,778.52 € =FV(C46;C47;;-C45)
Deposit at the end of 2014:
Principal 5,178.52 € =C48+C6 This deposit is made at the end of 2014
Rate (net) 1.26%
Time in years 2 It is asked how much there is at the end of 2016 i.e. two years la
Maturity value 5,309.84 € =FV(C53;C54;;-C52)
has 1,8 % interest rate.

ptions given.
her one.

1.80%
30%

s on the amoung:

1.80%
30%
is made at the end of 2014

he end of 2016 i.e. two years later.

An investment’s value has grown to 18900 € in 7 years. What was the original value of the investment
if it has earned interest at 5 % annual interest rate? Source tax is 30 %.

Principal 14,855.23 € =PV(C5;C6;;-C7) Nominal interest rate 5%

Rate (net) 3.5 % =H4*(1-H5) Source tax 30%
Time in years 7
Maturity value 18,900.00 €
investment
An industrial hall is on sale. The seller has made two propositions for payments.
A: 40 000 € immediately and 43 000 € after two years
B: the sum will be paid in three instalments, each worth 28 000 €, made annually. The first payment will be made im
Which offer is cheaper to the buyer, when using 9 % as the interest rate?

Idea: Calculate the present value for each future payment, in both options A and B, to be able to compare them.

Option A:
First payment 40,000.00 €

Second payment:
Principal 36,192.24 € =PV(C13;C14;;-C15)
Rate (net) 9%
Time in years 2
Maturity value 43,000.00 €

Total PV 76,192.24 € =C9+C12

Option B
First payment 28,000.00 €

Second payment:
Principal 25,688.07 €
Rate (net) 9%
Time in years 1
Maturity value 28,000 €

Third payment:
Principal 23,567.04 €
Rate (net) 9%
Time in years 2
Maturity value 28,000 €

Total PV 77,255.11 €

The option A has smaller present value. Thus, for the buyer, it is cheaper.
payment will be made immediately.

able to compare them.

Car’s value dropped from 28 900 € to 16 800 € in 4 years. Calculate by what average annual interest rate did the va

Principal 28900
Rate (net) -12.68% =RATE(C5;;C3;-C6)
Time in years 4
Maturity value 16800

The negative rate indicates that the value is decreasing!

nnual interest rate did the value decrease?
Houses’ values grows approximately by 3 % per year. How long would it take for a house’s value to grow from 400 0

Principal 400,000.00 €
Rate (net) 3.00%
Time in years 3.9847026 =NPER(C4;;C3;-C6)
Maturity value 450,000.00 €

Time in years (rounded up) 4 =ROUNDUP(C5;0)

se’s value to grow from 400 000 € to 450 000 €?
If a car’s value drops annually approximately by 8.4 %, how long does it take for the value to drop from 16 800 € to 8

Principal 16,800.00 €
Rate (net) -8.40% Notice that decrease is indicated with a minus sign!
Time in years 7.9001112 =NPER(C4;;C3;-C6)
Maturity value 8,400.00 €

Time in years (rounded up) 8 =ROUNDUP(C5;0)

If you get a negative time, check the

following:
1. Did you give rate with a minus sign?
2. Do you hve the principal and the
maturity value in the right boxes?
o drop from 16 800 € to 8 400 €?

ed with a minus sign!

In the beginning of 2014 a deposit of 25 000 € was made an a account. How much should be deposited on the acco
in the beginning of 2017 to have total balance of 60 000 € in the beginning of 2019? The interest rate is 1.4 % and

Deposit made in 2014:

Principal 25,000.00 € Nominal interest rate

Rate (net) 0.980 % =H6*(1-H7) Source tax
Time in years 3
Maturity value 25,742.23 € =FV(C7;C8;;-C6) This the money on the account in the beg

Total amount in 2017:

Principal 58,841.06 € =PV(C14;C15;;-C16) This the amount there needs to be inthe a

Rate (net) 0.980 % =C7
Time in years 2
Maturity value 60,000.00 € =60000

Second deposit 33,098.84 € =C13-C9 The difference of the values gives the add
d be deposited on the account
e interest rate is 1.4 % and the source tax is 30 %.

1.40%
30%

ey on the account in the beginning of 2017 based on the first deposit.

unt there needs to be inthe account in the beginning of 2017 in order to have 60 000 € in the end of 2019.

e of the values gives the additional deposit that needs to be made.

An apartment was bought in 1970 at a price of 54 500 mk (1 € = 5.94573 mk). It was sold in 2011 at a price of 385 0
By what average annual interest rate the value of the apartment has increased in real terms? Use CLI.

Finnish mk EUR
5.94573 1.00 €
54500 9,166.24 €

Price CLI
1970 9,166.24 € 223
2011 74,480.85 € 1812

Principal 74,480.85 €
Rate (net) 4.09% =RATE(D17;;D15;-D18)
Time in years 41 =2011-1970
Maturity value 385,000.00 €
2011 at a price of 385 000 €.
? Use CLI.
An investment’s value is expected to be doubled in 20 years. Calculate what the average annual interest rate should

Let's choose the original principal to be 100 €.

Principal 100.00 €
Rate (net) 3.526 % =RATE(C7;;C5;-C8)
Time in years 20
Maturity value 200.00 €
ual interest rate should be for this to happen.
One litre of gasoline cost 1.23 Finnish marks in the beginning of 1975. In the beginning of 2002 the price was 1.009
Calculate the real average annual increase in the gasoline price during this time. Use CLI.
(1 € = 5.94573 mk)

Finnish mk EUR
5.94573 1.00 €
1.23 0.21 €
Do not round the values when going from a step to another!
Refer to them!
Price CLI
1975 0.21 € 392
2002 0.82 € 1563

Principal 0.82 €
Rate (net) 0.75% =RATE(D17;;D15;-D18)
Time in years 27 =2002-1975
Maturity value 1.009 €
02 the price was 1.009 €.

m a step to another!
An account was opened in the beginning of 2012 when a deposit was made. An additional deposit of 3000 € was ma
In the beginning of 2017, the balance of the account was 12 000 €. The interest rate is 1.05 % and the source tax is
Calculate how much was deposited in the beginning of 2012.

Deposit made in 2015:

Principal 3,000.00 € Nominal interest rate

Rate (net) 0.735 % =H7*(1-H8) Source tax
Time in years 2
Maturity value 3,044.26 € =FV(C8;C9;;-C7)

Deposit made in 2012:

Principal 8,633.75 € =PV(C15;C16;;-C17)

Rate (net) 0.735 %
Time in years 5
Maturity value 8,955.74 € =12000-C10

This has the same idea as exercise 8. Similar steps can be done even though you start from the second d
 deposit of 3000 € was made in the beginning of 2015.
5 % and the source tax is 30 %.

1.05%
30%

ou start from the second deposit.

Challenging exercises

Answers

13. 6.043 %
14. 18,222.46 €
15. 30,756.94 €
Real estate’s value grew by 175 % in 12 years.
Calculate the rate of real average annual growth, when the prices have increased by 36 % over this time period.

Let's choose the investment's original value as 100 €.

In real terms the change has been:

Principal 136.00 € =100*(1+36%)
Rate (net) 6.043 % =RATE(C15;;C13;-C16)
Time in years 12
Maturity value 275.00 € =100*(1-12%)
36 % over this time period.
You are interested to purchasing a property. Another interested buyer has already made an offer which consists of t
first (80 000 €) is paid immediately and the second payment of 20 000 € after two years.
You want to make a competing offer, which present value should be 5 000 € more than the offer already made.
You plan to offer 87500 € immediately and the rest after three years.
Calculate how much you should offer to be paid after three years.
Use 6 % as the interest rate.

Idea: Calculate the total present value of the competitor's offer and calculate yours based on that.

Competitor's offer:
First payment 80,000.00 €

Second payment:
Principal 17,799.93 € =PV(C13;C14;;-C15)
Rate (net) 6%
Time in years 2
Maturity value 20,000.00 €

Total PV 97,799.93 € =C9+C12

Your offer:
Total PV 102,799.93 €

First payment 87,500.00 €

Second payment:
Principal 15,299.93 €
Rate (net) 6%
Time in years 3
Maturity value 18,222.46 €
an offer which consists of two payments:

e offer already made.

Balance of an account was 48900 € at the end of 2015.
It is known that the account was opened on the 12 October in 1998.
Assume that the interest rate has been 1.2 % and source tax 30 % the whole time.
What was the original deposit on the date the account was opened when there has been one additional deposit of 1

Principal 43,861.35 € Nominal interest rate 1.20%

Rate (net) 0.840 % Source tax 30%
Time in years 13
Maturity value 48,900.00 €

Principal 30,812.92 €
Rate (net) 0.840 %
Time in years 4
Maturity value 31,861.35 €

Principal 30,756.94 € Start date 10/12/1998

Rate (net) 0.84% End date 12/31/1998
Time (days) 78
Maturity value 30,812.92 €
e additional deposit of 12 000 € made at the end of 2002.