Joshua bought a stock for $17 a share two years ago. The stock does not pay any dividends. Today Joshua sold the stock for $18.50 a share. What was his internal rate of return on this investment?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the annualized rate of return that makes the net present value of an investment equal to zero. In this case, the net present value is the difference between the sale price of the stock and the purchase price. The IRR can be calculated using the following formula:IRR = (Sale price / Purchase price)^(1 / Number of years) - 1In this case, the sale price is $18.50, the purchase price is $17, and the number of years is 2. Plugging these values into the formula, we get:IRR = (18.50 / 17)^(1 / 2) - 1 = 0.043 = 4.3%Therefore, the internal rate of return on this investment is 4.3%.

Joshua Bought a Stock for $17 a Share Two Years