My Math Forum IRR Problem

 Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance

 October 3rd, 2013, 06:33 AM #1 Newbie   Joined: Oct 2013 Posts: 2 Thanks: 0 IRR Problem Hello! I have no significant background in math and I just started studying finance and now our professor assigned us our first problems. Mine is the one dealing with the internal rate of return (IRR). ''John takes a loan of 100 euros which he pays back after 45 days with a sum of 131. Count the IRR for the loan for a year.'' I have no doubt that for the people on this forum this problem must seem ridiculously easy. Thanks in advance!
 October 3rd, 2013, 04:09 PM #2 Global Moderator     Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: IRR Problem Do you know the definition of IRR?
 October 4th, 2013, 05:34 AM #3 Newbie   Joined: Oct 2013 Posts: 2 Thanks: 0 Re: IRR Problem Yeah and I think I've worked out a solution. 1,31^8 - 1 = 767%.
October 4th, 2013, 09:40 AM   #4
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Re: IRR Problem

Quote:
 Originally Posted by Bloodfeast Yeah and I think I've worked out a solution. 1,31^8 - 1 = 767%.
360 / 45 = 8 .... looks good!

Becomes same as: calculate future value of \$100 over 8 years, at annual rate of 31%.
100(1.31^ = 867 (rounded)

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