The Internal Rate of Return Is a Less Meaningful Measure

question 32

True/False

The internal rate of return is a less meaningful measure of an investment's performance than holding period return if the holding period is other than 1 year.

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Definitions:

Journal Entry

A record of a business transaction in the accounting journal that shows the accounts and amounts debited and credited.

Merchandise Inventory

Goods a business has acquired to sell to customers but has not yet sold.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Certificate of Deposit

A savings certificate issued by a bank to a person depositing money for a specified length of time, typically earning a fixed interest rate.