You buy 1,000 shares of stock at $5.00 per share in January of 2004. You sell the stock at $7.50 per share in January of 2007. What is your internal rate of return (IRR)?
A) 1.1447%
B) 14.47%
C) 18.00%
D) 87.36%

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is calculated based on the formula for the annualized return, which is [(Ending Value/Beginning Value)^(1/Number of Years)] - 1. In this case, the beginning value is $5,000 (1,000 shares at $5.00 each), and the ending value is $7,500 (1,000 shares at $7.50 each). The investment period is 3 years (from January 2004 to January 2007). Plugging these values into the formula gives an IRR of approximately 14.47%.

You Buy 1,000 Shares of Stock at $5