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Capital Budgeting- Internal Rate of Return (IRR)

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An insurance firm agrees to pay you $3,310 at the end of 20 years if you pay premiums of $100 per year at the end of each year of the 20 years. Find the internal rate of return to the nearest whole percentage point.

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Solution Summary

The solution calculates IRR for annual premium payments.

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The internal rate of return r is that rate which will equate the premium payments to the final payment received.

100 x FVIFA (20 years , r % ) ...

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