The Following Investment Cash Flows Have Been Entered into Cells

question 119

Multiple Choice

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).

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Definitions:

Excess Returns

The return on an investment minus the return on a benchmark, indicating the performance of the investment relative to the market.

Historical Standard Deviation

A statistical measure that quantifies the variability or dispersion of a set of past data points.

Small Stocks

Shares of relatively small companies, which may offer higher growth potential but also come with higher risk.

Long-Term Bonds

Debt securities with a maturity period typically longer than 10 years, offering the holder a fixed or variable interest rate.