Comment on the following statement: "One of the most valuable concepts in financial planning is the internal rate of return."

Question

Quizplus · Accepted Answer

The Answer is A frequently asked question relates to the internal rate of return on an investment. Assume that Judy Kelly wishes to purchase 10-year, zero-coupon bonds for $250 each. Upon maturity, each bond will pay her $1,000, or a total of $10,000. She wants to know how much money this investment is making for her, or, to put in technical jargon, what is the internal rate of return (IRR) on this investment, assuming that the tax consequences and commissions are ignored.
The calculation of the IRR on this investment, which can be made by using the calculator, shows that Judy Kelly would receive an annual return of 14.35 percent. Judy can compare this rate with alternative investments which she should consider before making an investment in these zero-coupon bonds.

Comment on the Following Statement: "One of the Most Valuable