Invalid argument to function FINANCE 'pv' with 0 interest rate

[newboy1218]

Hi, I am trying to calculate the present value by using the FINANCE function in SAS. However, I found that when my rows having interest as 0%, the log threw me error for example saying:

NOTE: Invalid argument to function FINANCE('pv',0,24,-100) at line 28 column 7.

What should I do to solve it? Here is the code I used: 

data aa;
input int_rate annual_payment;
datalines;
0 1200
0 4000
0.008325 1000
0.008325 500
;
run;

data bb;
set aa;
pv = finance('pv', int_rate, 24, - annual_payment / 12);
run;

Sample data - HAVE:

#	int_rate	annual_payment
1	0	1200
2	0	4000
3	0.008325	1000
4	0.008325	500

WANT:

#	int_rate	annual_payment	pv
1	0	1200	2400
2	0	4000	8000
3	0.008325	1000	1806.0852117
4	0.008325	500	903.04260585

[ballardw]

Don't call the function with an invalid parameter. That is accomplished with a simple If.

What rule do want when to have as a result when the rate is 0? I might guess that you want 2 time the annual payment but I have no idea if that is actually the rule you want to program.

data bb;
   set aa;
   if rate > 0 then pv = finance('pv', int_rate, 24, - annual_payment / 12);
   else <do what you want when the rate is 0>;
run;

 

NOT a finance person so don't expect a recommendation on an actual value to provide when there the rate is 0.

---

@newboy1218 wrote:

Hi, I am trying to calculate the present value by using the FINANCE function in SAS. However, I found that when my rows having interest as 0%, the log threw me error for example saying:

NOTE: Invalid argument to function FINANCE('pv',0,24,-100) at line 28 column 7.

What should I do to solve it? Here is the code I used: 

data aa;
input int_rate annual_payment;
datalines;
0 1200
0 4000
0.008325 1000
0.008325 500
;
run;

data bb;
set aa;
pv = finance('pv', int_rate, 24, - annual_payment / 12);
run;

Sample data - HAVE:

#	int_rate	annual_payment
1	0	1200
2	0	4000
3	0.008325	1000
4	0.008325	500

WANT:

#	int_rate	annual_payment	pv
1	0	1200	2400
2	0	4000	8000
3	0.008325	1000	1806.0852117
4	0.008325	500	903.04260585

---

[mkeintz · Accepted solution]

This is interesting, since logically speaking, there should be no problem with rate=0.   The 

FINANCE PV function documentation has no restrictions on the interest rate.  If there is documentation somewhere else about the finance function not tolerating int_rate=0, I haven't seen it.

<Editted note>:

The most that I have seen about interest rate is in the FINANCE Function Documentation which only says

interest-rates

specifies rates that are provided as numeric values and not as percentages.

This might be worth presenting to SAS as a possibly bug, or at least a need for improved documentation.

</end of editted note>

And interest rate=0 is really a simple calculation for PV - just a simple sum of payments.  There must be something about the underlying algorithm not being robust against int_rate=0, since using values that are almost zero, both positive and negative (0.000000000000001 and -0.000000000000001) produce values very close to PV=2400.

But you could protect yourself against this by changing

pv = finance('pv', int_rate, 24, - annual_payment / 12);

to

if int_rate=0 then pv=24*annual_payment/12; else
pv = finance('pv', int_rate, 24, - annual_payment / 12);