Money-Weighted Rate of Return - IRR

Reading #32 Kaplan p66.

Solving any IRR equation is a trial and error process of gueesing a reutrn and solving for ending value …

Sorry I forget what’s the limitation of using calcuator to solve IRR…I think under certain circumstance we can use calculator? Thanks.

Their point is that the calculator uses a trial-and-error process. It’s a sophisticated T&E, to be sure, but a T&E nonetheless.

Well it’s like in excel when you are discounting cash flows.

You can use the IRR function or you can find the discount rate that solves for NPV = 0 yourself through a trial and error process.

The IRR function (on excel or on a calculator) does nothing more than doing the itirations for you.

Or you can use Goal Seek, or Solver.