Joshua bought a stock for $17 a share two years ago.The stock does not pay any dividends.Today Izzie sold the stock for $18.50 a share.What was his internal rate of return on this investment?
A) 4.3%
B) 6.2%
C) 7.1%
D) 8.8%

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the annualized rate of return that makes the net present value (NPV) of all cash flows from a particular investment equal to zero. In this case, the NPV is:NPV = -17 + 18.50 / (1 + IRR)^2Setting NPV = 0 and solving for IRR, we get:IRR = 4.3%

Joshua Bought a Stock for $17 a Share Two Years