23) Bill has been adding funds to his investment account each year for the past

Question

23) Bill has been adding funds to his investment account each year for the past 3 years. He started with 23) an initial investment of $1,000. After earning a 10% return the first year, he added S3000 to his portfolio. In this year his investments I earned a 2% return. Last year, discouraged by the recent results, he only added S500 to his portfolio, but in this final year his investments earned 8%, what was Bill's Internal rate of return for the whole investment process? ost 5%. Undeterred, Bill added $2.000 the next year and use cash flow function and irr function) B) 3.5% C) 25% D)3% A) 3.75%

Explanation / Answer

23. option d. is correct

at IRR rate, current investment value should equal the future values of investments made at different periods.

current value of investment:

currently the investment value is 7033.93

at 3% rate of return the investment would have been:

the future value 7040 is approximatedly matching, hence option d. is correct

Opening Invested return closing balance                -   1,000.00      100.00 1,100.00 1,100.00 3,000.00     -205.00 3,895.00 3,895.00 2,000.00      117.90 6,012.90 6,012.90      500.00      521.03 7,033.93

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