IRR What type of interest
Hello,
I am struggling to understand what kind of interest the excel formula =IRR(values, guess) x 12 gives when having monthly cash flows.
I have done a simple simulation with an investment of -1000 and a revenue of 87.92 on the next 12 periods on which I get an IRR of 10.00% based on the excel formula above.
If I do an effect formula =effect(nominal_rate,npery), I get 10.47% which is almost aligned with XIRR 10.50% (with each date separated apart by 365/12).
My question is the following: when I get IRR =10.00%, is it a nominal interest rate not compounded? And the 10.47% is a effective interest rate assuming interests are compounding at each period?
I am confused as you can read but I hope my message makes sense...
Thank you
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