Irr help!!!!!!

[4be]

This is a long shot but hey worth a try if anyone can help.

I need to work out the monthly money weighted return on a portfolio. (IRR)

Cash Flows at beginning of period ( 3 months 3 Cash flows)

Openning value 100
CF1 : 10
CF2 : 50
CF3 : 20

I have been given this formula
(OV + CF1) × (1 + R)3 + CF2 ×(1 + R)2 + CF3 × (1 + R) = CV
110 × (1 + R)3 + 50 × (1 + R)2 + 20 × (1 + R) = 186.10

Now I have a fin calculator to work out the monthly IRR however I'm not coming up with what the answer should be.

Anyone come across this and could help me out?
Cheers
4be

[Lizard]

Hi 4be,

According to wikipedia, a "money-weighted return calculated over a period such as a month or a quarter assumes that the rate of return over that period is constant." From that, I would presume you could just take the total of money remaining (presumably still 100) and monthly cashflows of 80 and then work out a return over a three month period using std formulae... i.e. (180/100)^(1/3)-1 = 21.6% pm.

[shasta]

This is a long shot but hey worth a try if anyone can help.

I need to work out the monthly money weighted return on a portfolio. (IRR)

Cash Flows at beginning of period ( 3 months 3 Cash flows)

Openning value 100
CF1 : 10
CF2 : 50
CF3 : 20

I have been given this formula
(OV + CF1) × (1 + R)3 + CF2 ×(1 + R)2 + CF3 × (1 + R) = CV
110 × (1 + R)3 + 50 × (1 + R)2 + 20 × (1 + R) = 186.10

Now I have a fin calculator to work out the monthly IRR however I'm not coming up with what the answer should be.

Anyone come across this and could help me out?
Cheers
4be

U got excel, the forumlas are all set up in there to just pop in the details

[4be]

Thanks Lizard & Shasta for reply,

The answer is MWR= 1.34% Per Month which is what im having trouble figuring out how they got this.

I'll have a look at excel and see what I come up with.

Cheers
4be

[4be]

mmmmm tried excel n doesn't seem to work for me not too clued up with how the formulas work for excel anyway. If anyone has a fin calculator and comes up with something let me know.

Thanks again
4be

[Lizard]

Presumably at 1.34%pm, then those are annual cashflows, not monthly - although even with 36 monthly periods, I still get a higher result at 1.65%.

[4be]

If R= 1.34% and put into this formula it shows it is the correct return and the equation comes out at 186.10 which is the closing value of the Portfolio.


110 × (1 + R)3 + 50 × (1 + R)2 + 20 × (1 + R) = 186.10

I'm doing a course through a aussie company and they aren't giving me the required support for this question and there supposed to be industry experts HA! (aussies eh)

[Lizard]

Oh, I see, they are adding those amounts of new cashflow into the investment and then getting 186.10 out at the end.... now it makes sense. Sorry, I thought those cashflows were the amounts they were being given back on 100...

So your IRR calculation is on the following series of cashflows: -110, -50, -20, +186.10. Easiest to use the financial calculator or spreadsheet function on that, as IRR is a bit strenuous to do manually as requires testing a series of guesses.

The "catch" with this question is invested cashflows being at start of month, so your first cashflow goes in at the same time as the initial deposit of 100.

[4be]

Oh, I see, they are adding those amounts of new cashflow into the investment and then getting 186.10 out at the end.... now it makes sense. Sorry, I thought those cashflows were the amounts they were being given back on 100...

So your IRR calculation is on the following series of cashflows: -110, -50, -20, +186.10. Easiest to use the financial calculator or spreadsheet function on that, as IRR is a bit strenuous to do manually as requires testing a series of guesses.

The "catch" with this question is invested cashflows being at start of month, so your first cashflow goes in at the same time as the initial deposit of 100.

Wow, lizard you legend. Using my Fin calculator it works out at 1.34%. Perfect.

I have one more question however, could you explain to me why the CF 50 & 20 are negative?

Thanks for everyones contribution , problem solved . wish my course forum would be this much help.

4be