Authors
Susan E. Kruck & John J. Maher
Abstract
Accounting practitioners and academics have identified spreadsheet and model development skills as important for accounting graduates to possess.
We present an adaptable mortgage analysis project that provides a practical setting in which students can develop critical spreadsheet modeling skills while demonstrating knowledge of several important principles of accounting and finance. The developed spreadsheet model is designed in a structured manner to permit changing the necessary financial terms and facilitates performing sensitivity analysis on critical variables.
The analysis requires an informed decision be made between employing a fixed rate mortgage or an adjustable rate mortgage (ARM) for financing a home purchase. Important theoretical skills required to arrive at an acceptable solution include understanding of present value concepts, effective rate method of interest calculation, and amortization of principle balance.
The student must also verify proficiency with the necessary theoretical and practical skills of effective spreadsheet design and model development.
Sample
Sound spreadsheet development techniques should be utilized in developing the mortgage analysis model.
This implies that the spreadsheet should be developed using a consistent structured design.
It is best to break the model down into separate 'sheets' or pages with each sheet devoted to a particular aspect of the model.
Publication
1999, Journal of Accounting Education, Volume 17, Issue 2, Spring, pages 267-291
Full article
Home mortgage analysis for cultivating crucial spreadsheet and model development skills
