Finance

A library of common financial functions to be used in time value of money calculations.

Introduction

This library is a set of common finance formulas used in time value of money calculations. The formulas are designed to have the same input style as Microsoft Excel's finance formula of the same name, and should provide substantially the same return values. (Unit tests all pass to the 8th decimal place).

This library is a fork of the excellent tvm-financejs by Kris Karstedt.

Backstory

tvm-financejs came about as Kris Karstedt was building a small prototype application that required some simple financial calculations for loan payments, rate, and present value. He was very familiar with the formulas and their uses in Excel (as was my target audience), and looked online for a JavaScript library that had a similar formula structure for the formulas he needed. Essam Al Joubori's great finance.js had most of the formulas he needed and in a great integration format, but was missing the critical RATE formula. After a long search and testing of several examples of RATE formulas in other libraries that kept providing inconsistent results compared to Excel, he found examples of Microsoft's source code for Excel in VBA format. The RATE formula in this document needed a couple tweaks, but performed with great precision compared to Excel.

This library is an attempt to refactor tvm-financejs using TypeScript, ES module support, native error handling, newer language features, and a more functional approach.

Installation

Via npm

npm install @travishorn/finance

Example Usage

Using named exports:

import { pmt } from "@travishorn/finance";

// To calculate a payment:
Math.round(pmt(0.0525, 5, -10000) * 100) / 100;
// Returns 2325.73

Or default export:

import finance from "@travishorn/finance";

// To calculate a payment:
Math.round(finance.pmt(0.0525, 5, -10000) * 100) / 100;
// Returns 2325.73

Available Functions

General Notes

• Just like Excel, this library does not add rounding to the outputs. In many cases, you may want to use these formulas in combination with each other, in which case a rounded output will degrade the accuracy of the final values.
• Inputs in [ ] are optional for the formula.
• PV is typically represented as a negative value in the inputs/outputs.
• Rate must be represented in equivalent format to the periods. (e.g. if the APR is 5% but the periods are monthly, you need to divide the rate by 12).

Input Variables

| Variable | Description | | :--------- | :-------------------------------------------------------------------------------------------- | | pv | Present value | | fv | Future value | | pmt | Payment | | nper | Total number of periods | | per | A specific period | | rate | Rate for the period(s) | | type | When payments are due (false = end of period/arrears. true = beginning of period/advance) | | guess | A guess at the rate | | values | A set of periodic cash flows |

Present Value

pv(rate, nper, pmt, [fv], [type]);

Returns the present value of an investment, or the total amount that a series of future payments is worth now.

Future Value

fv(rate, nper, pmt, pv, [type]);

Returns the future value of an investment based on periodic, equal, payments and a constant interest rate.

Payment

pmt(rate, nper, pv, [fv], [type]);

Calculates the payment for a loan based on a constant stream of equal payments and a constant interest rate.

Interest Payment

ipmt(rate, per, nper, pv, [fv], [type]);

Returns the calculated interest portion of a payment for a specific period based on a constant stream of equal payments and a constant interest rate.

Principal Payment

ppmt(rate, per, nper, pv, [fv\], [type]);

Returns the calculated principal portion of a payment for a specific period based on a constant stream of equal payments and a constant interest rate.

Rate

rate(nper, pmt, pv, [fv], [type], [guess]);

Returns the interest rate per period for a loan or investment.

Net Present Value

npv(rate, value1, [value2], ... [valueN]);

Returns the net present value of an investment based on a constant rate of return and a series of future payments/investments (as negative values) and income/return (as positive values).

Internal Rate of Return

irr(values, [guess]);

Returns the internal rate of return for a series of cash flows.

A couple of items to note about this formula:

• The variable values must be input as an array.
• There must be at least one negative and one positive value as part of the cash flow.
• Cash flows are assumed to be due in the same order they are arranged in the Array.

Example usage:

const returnIRR = () => {
  const values = [-1500, 500, 500, 500, 500];
  return (Math.round(irr(values) * 100) / 100) * 100;
};

// returns 12.59

Contributing

Feel free to contribute and add more formulas to the library. Please try to add comments explaining the math behind the functions as they are added, and ensure unit tests are added/updated appropriately. The library is set up to use Mocha and Chai for unit testing.

Testing

Each finance formula has a single test comprised of a number of sub-tests. The tests are designed to either:

• Match the equivalent Excel formula to 8 decimal places; or
• Trigger a specific error message.

Test scenarios comprise a variety of terms, periods, types, and inputs.

To run the test suites:

npm test

The Excel version tested against is Microsoft Excel for Office 365 MSO(16.0.12527.20260) 32-bit.

License

The MIT License (MIT)

Copyright © 2022 Travis Horn

Permission is hereby granted, free of charge, to any person obtaining a copy of this software and associated documentation files (the “Software”), to deal in the Software without restriction, including without limitation the rights to use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the Software, and to permit persons to whom the Software is furnished to do so, subject to the following conditions:

The above copyright notice and this permission notice shall be included in all copies or substantial portions of the Software.

THE SOFTWARE IS PROVIDED “AS IS”, WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING FROM, OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN THE SOFTWARE.