The document discusses using the INDEX function in Excel to easily switch between different debt principal repayment scenarios in a financial model. INDEX allows selecting a value from an array based on a cell reference, so the model can display the appropriate repayment profile when a "switch" cell is changed. A stretch row is recommended to keep the coding flexible when scenarios are added or removed. Nested IF statements and other alternatives like CHOOSE and OFFSET are not as transparent or flexible as INDEX.

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SELECTION
Using INDEX

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5. There are numerous different ways of repaying the principal on a term loan: annuity
style; level principal; bullet; balloon and sculpted repayment profiles.
A financial model should be able to switch easily from one scenario to another. A good
Excel function to use is INDEX.
IF, CHOOSE and OFFSET are also frequently used by modellers – but they lack the
structure, transparency and flexibility of INDEX.
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PROFILE
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Using INDEX

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DEBT PRINCIPAL REPAYMENT SCENARIOS
In this calculation block, we have three debt principal repayment scenarios with different
maturities. All are based on a level principal repayment profile; each adds up to 100 per
cent.
We have a senior debt principal repayment profile scenario switch at the top of the
calculation block. We need to calculate an active senior debt principal repayment profile.
I seek an Excel function such that when the switch is 1, we take the first profile. When the
switch is 2, we take the second. When the switch is 3, we take the third.

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INDEX FUNCTION
The calculation is = INDEX( first scenario: last scenario, switch).
INDEX considers an array of data (in this instance the data is in a column) and returns a
value from that array according to a cell’s position. When the switch is 1, the calculation
returns the value from the first cell in the range of cells.
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RETURNING AN ERROR
If the value of the switch exceeds the number of rows in the array then the INDEX function
will return an error.
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STRETCH ROWS
Use a stretch row so that new scenarios may be introduced and removed with ease. The
stretch row is key to keeping the coding flexible.
Note the “n/a” text string typed in each of the cells of the stretch row.

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NESTED IF STATEMENTS
We do not recommend nested IF statements.
They are unwieldy and lead to formulae that are difficult to understand and review
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CHOOSE FUNCTION
CHOOSE lacks flexibility when introducing or removing scenarios. This is because its
syntax relies on individual cell references rather than a range of cells.

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OFFSET FUNCTION
OFFSET has a very poor audit trail. The audit arrows point to a blank cell and ignore the
relevant data.
It is also difficult to restrict the range in OFFSET functions. If the value of the switch
exceeds the number of rows of the scenario selection then the calculation will still appear
to give a valid answer.