I have tried hard to find a formula which can help me to solve a question. If one of my client is interested in investing 10,000 for 10 years with semi annualy re-investment option @ 10% what will be his IRR for the project.
For simple problems like this where the numbers are constant from year to year, then the IRR will equal the annual effective interest rate. The answer to this problem is 10.25%. This is the IRR as well as the annual effective interest rate.
You can see how this works if you go to Compounding Interest Calculator. Put in the following numbers to get the above result: 10000, 10%, 2, and 120.
