JT purchases 1,000 shares of stock at $23.50 per share in January 2006. He sells the 1,000 shares in January 2110 for $35.50 per share. What is his internal rate of return?
A) 10.86%
B) 16.08%
C) 8.06%
D) 6.08%

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the annualized effective compounded return rate that makes the net present value (NPV) of all cash flows from a particular project or investment equal to zero. In this case, the NPV of the investment is:NPV = -1,000 * $23.50 + 1,000 * $35.50 = $12,000The IRR can be found using a financial calculator or by using a trial-and-error approach. Using a financial calculator, the IRR is found to be 10.86%.

JT Purchases 1,000 Shares of Stock at $23