Internal Rate of Return Calculation | CFA Level 1 Exam Prep

Calculate the Internal Rate of Return (IRR) for a Series of Cash Flows

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Question

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$25,000>, Year 1: $5,000, Year 2: $0, Year 3: $30,000? (Note that the <> are used to indicate a negative number).

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D

On the BAII Plus, press CF 2nd CLRWork 25000 +/- ENTER DownArrow 5000 ENTER DownArrow DownArrow 0 ENTER DownArrow DownArrow 30000 ENTER

DownArrow DownArrow 2nd Quit. Then press Irr CPT. On the HP12C, press these keys: 25000 CHS BlueShift CFo 5000 BlueShift CFj 0 BlueShift CFj 30000

BlueShift CFj Then press YellowShift Irr. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure the BAII

Plus has the P/Y value set to 1.