A financial asset will pay you $10,000 at the end of 10 years if you pay premiums of $175 per year at the end of each year for 10 years. What is the IRR of this financial asset?
A) 33.26 percent
B) 34.98 percent
C) 35.93 percent
D) 36.72 percent

Question

Quizplus · Accepted Answer

The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. In this case, the cash flows are -$175 for 10 years and +$10,000 at the end of the 10th year. The IRR can be found using financial calculators or spreadsheet software by setting the NPV of these cash flows to zero. The correct IRR for these cash flows is approximately 35.93 percent, making option C the correct answer.

A Financial Asset Will Pay You $10,000 at the End