23) Bill has been adding funds to his investment account each year for the past
ID: 2806811 • Letter: 2
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