An investor is investing $100,000 today and is expecting to receive $1500 each m

ID: 2612298 • Letter: A

Question

An investor is investing $100,000 today and is expecting to receive $1500 each month for the next five years. At the end of five years the $100,000 will be returned. What is the IRR of this investment?
Please explain how to do this on a financial calculator! I know what the answer is but I can't get my calculator to come up with it. An investor is investing $100,000 today and is expecting to receive $1500 each month for the next five years. At the end of five years the $100,000 will be returned. What is the IRR of this investment?
Please explain how to do this on a financial calculator! I know what the answer is but I can't get my calculator to come up with it.
Please explain how to do this on a financial calculator! I know what the answer is but I can't get my calculator to come up with it.

Explanation / Answer

Initial Investment = 100000

Total Amount received each month for the next five years = 1500*12*5 = 90000

Amount returned After five years = 100000

Total Amount received = 190000

Firstly, put -100000 in Initial investment/Cash Outflow option

Secondly, put 18000 (1500*12) in each year Cash Inflow option. In the fifth year, total cash inflow would be 118000 (18000 + 100000)

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

-100000

18000

118000

Now press on IRR option. The IRR would come out to be 18%.