Internal Rate of Return Calculation | CFA Level 1 Exam Prep

Calculating Internal Rate of Return (IRR) for Cash Flows

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Question

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$15,000>, Year 1: $2,000, Year 2: $0, Year 3: $15,000, Year 4 to indicate a negative number).

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Explanations

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A. B. C. D. E.

Explanation

On the BAII Plus, press CF 2nd CLRWork 15000 +/- ENTER DownArrow 2000 ENTER DownArrow DownArrow 0 ENTER DownArrow DownArrow 15000 ENTER

DownArrow DownArrow 0 ENTER DownArrow DownArrow 18000 ENTER DownArrow DownArrow 2nd Quit. Then press Irr CPT. On the HP12C, press these keys: 15000 CHS BlueShift CFo 2000 BlueShift CFj 0 BlueShift CFj 15000

BlueShift CFj 0 BlueShift CFj 18000 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.

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