The internal rate of return (IRR) is __________. the discount rate that makes th
ID: 2753645 • Letter: T
Question
The internal rate of return (IRR) is __________.
the discount rate that makes the bond value positive (for premium bonds)
the discount rate that makes the NPV greater than zero
the discount rate that makes the NPV less than zero
the discount rate that makes the NPV equal to zero
A.the discount rate that makes the bond value positive (for premium bonds)
B.the discount rate that makes the NPV greater than zero
C.the discount rate that makes the NPV less than zero
D.the discount rate that makes the NPV equal to zero
Explanation / Answer
The internal rate of return (IRR) is the discount rate that makes the Npv equal to zero.
Internal rate of return gives oppurtunity to compare alternative investment to investor based on the yield.
Internal rate of return can be defined as the discount rate that makes all future cash flow equals to the intial investment.Internal rate of return calculates breakeven rate of return for the investor.The investment should be rejected or not accepted if the internal rate of return is less than required rate of return and vice-versa, the investment should be accepted if the internal rate of return is more than the required rate of the return for the investor.
Therefore, The answer id D)
The internal rate of return is the discount rate that makes the NPV equal to zero
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