The Internal Rate of Return for a Proposed Investment Can

question 6

Multiple Choice

The internal rate of return for a proposed investment can be calculated:

• A) if the cash flow table is identical to future values of a series of cash flows.
• B) if the future value of a series of cash flows can be arrived at by the annuity accumulation factor.
• C) by finding a discount rate that yields a zero net present value for a proposed investment.
• D) by finding a discount rate that yields a positive net present value for a proposed investment.

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Definitions:

Lump Sum Payment

A single payment made at a particular time, as opposed to several smaller installments.

Compounded Monthly

This is the process of calculating interest on both the initial principal and the accumulated interest from previous periods on a monthly basis.

Mutual Fund

An investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities.

Compounded Monthly

Interest calculation method where the interest is added to the principal balance monthly, leading to compound growth.