You have made an investment of $250 that will yield a profit of $30 in one year.If the interest rate is 11.5% is this a good investment.
A) Yes, because the internal rate of return is greater than the interest rate
B) Yes, because the internal rate of return is less than the interest rate
C) No, because the internal rate of return is greater than the interest rate
D) No, because the internal rate of return is less than the interest rate

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the rate at which the investment breaks even, meaning that the profit equals the initial investment. In this case, the IRR can be calculated as:

IRR = (Profit / Initial investment)^(1/Time) - 1 
= ($30 / $250)^(1/1) - 1 
= 0.12 or 12%

Since the IRR (12%) is greater than the interest rate (11.5%), this investment can be considered good.

You Have Made an Investment of $250 That Will Yield