The following investment cash flows have been entered into cells B5 through B9 of an EXCEL spreadsheet. B5 $(5,200 ), B6 $2,100, B7 $1,300, B8 $1,800, B9 $1,200, where $5,200 is the cost of the investment and the following amounts are cash flows at the end of years one through four. The correct function for computing the yield on this investment is
A) =irr(B6:B9)+B5.
B) =irr(B6:B9).
C) =rate(4,0,-5200, 1200).
D) =ytm(B5, B6:B9).

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) function in Excel is used to calculate the yield or rate of return on an investment. The cash flows are entered as a series of values with the initial investment being entered as a negative value. In this case, the cash flows are in cells B6 through B9, with the initial investment of $5,200 in cell B5. The correct function to calculate the yield on this investment is IRR(B5:B9), which calculates the internal rate of return based on the cash flows in cells B5 through B9. Therefore, the correct choice is B.

The Following Investment Cash Flows Have Been Entered into Cells