Skip to main content

Consortium for Mathematics and its Applications

Product ID: 99750
Supplementary Print
Undergraduate

Closing in on the Internal Rate of Return (UMAP)

Author: Robert A. Beezer


This module describes three iterative methods for solving equations, motivated by the computation of the internal rate of return (IRR). Two of these methods are general and well known (bisection, Newton's), and the third is peculiar to the computation of the IRR. Each method is illustrated by an application to an actual investment in stocks, bonds, or a mutual fund. Several other investments are described in the exercises.

Table of Contents:

AN INHERITANCE
Stocks
Bonds
Mutual Funds
Comparison

THE TIME VALUE OF MONEY

THE INTERNAL RATE OF RETURN

COMPUTATION OF THE IRR

ITERATIVE SOLUTION METHODS
The Bisection Method
Newton's Method
Convex Method

CONCLUSION

EXERCISES

SOLUTIONS TO THE EXERCISES

REFERENCES

ACKNOWLEDGMENTS

ABOUT THE AUTHOR

©1997 by COMAP, Inc.
UMAP Module
32 pages

Mathematics Topics:

Calculus

Application Areas:

Business & Economics , Finance

Prerequisites:

Continuity; intermediate value theorem; first and second derivatives.

You must have a Full Membership to download this resource.

If you're already a member, login here.

Not yet a member?