Assume that an investment,with a single initial cost of $1,000 and a yield of $50 monthly for 10 years,had a 7% IRR in the 60th month and a 7.2% IRR five months later.The IRR can be 6.8% in the 62nd month.

Question

Quizplus · Accepted Answer

IRR (Internal Rate of Return) is a metric used to evaluate the profitability of potential investments. It is a constant value for a given set of cash flows (an initial investment followed by a series of returns). The IRR does not fluctuate from month to month; it is determined by the initial investment and the pattern of returns. The scenario described suggests a misunderstanding of how IRR works; it would not change in the manner described if the cash flows remain as initially defined.

Assume That an Investment,with a Single Initial Cost of $1,000