When Computing an Investment's Internal Rate of Return Using a Financial

question 7

Multiple Choice

When computing an investment's internal rate of return using a financial calculator or spreadsheet such as Excel, which of the following should be entered as a negative number?

• A) the number of time periods
• B) dividend or interest payments
• C) the price at which the investment is sold
• D) the initial cost of the investment

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Definitions:

Dividend

A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits.

Treasury Stock

Shares that were once part of the outstanding shares of a company but were later reacquired and are held in the company’s treasury.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership of a fraction of a corporation, entitling the holder to a share of the company's profits.

Retained Earnings

Refers to the portion of net income left over for the business after it has paid out dividends to its shareholders.