Calculating Internal Rate of Return

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Calculating Internal Rate of Return
Consider your friend’s perspective;
The $500 will be negative cash-flow while the reimbursement will be positive cash-flow;
Required Amount=500$
Interest rate=0.08= Internal Rate of Return
Grace period=1 Year
Number of Installments=5 annual installments
The required annual payment is the expected Reimbursement. Generally, Internal Rate of Return is computed as follows;
Principal+C.F1+IRRn=0
Principal= initial amount lent and it is a negative Cash-flow
IRR=Internal Rate of Return
n= number of installments.
C.F= Cash-flow= the Reimbursement which is represented by ‘x’ in our case below
Incorporating the values into the formula;
-500+x1+0.081+x1+0.082+x1+0.083+x1+0.084+x1+0.085+x1+0.086=0
Your friend expects the $500 to gain interest in the first year though you would start paying after a year.
-500+x1.081+x1.082+x1.083+x1.084+x...