Chapter 29. Using Solver for Financial Planning

  • Can I use Solver to check out the accuracy of the Excel PMT function or to determine mortgage payments for a variable interest rate?

  • Can I use Solver to determine how much money I need to save for retirement?

The Excel Solver can be a powerful tool for analyzing financial planning problems. In many financial planning problems, a quantity such as the unpaid balance on a loan or the amount of money needed for retirement changes over time. For example, consider a situation in which you borrow money. Because only the noninterest portion of each monthly payment reduces the unpaid loan balance, we know that the following equation (which I’ll refer to as equation 1) is true.

(Unpaid loan balance at end ...

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