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Strategies & Market Trends : Quicken - Problems and Answers....
INTU 648.75-0.7%Nov 7 9:30 AM EST

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To: stock bull who wrote (1240)1/1/2008 5:43:23 PM
From: peter michaelson  Read Replies (2) of 1539
 
IMO, IRR is not intuitive until you play around with it quite a bit.

One great way to experiment is by using Excel. Put some numbers in. Calculate the IRR. Change the numbers, and the timings - re-calculate.

A huge IRR is not necessarily significant, unless it is over a reasonable period of time. Also, it is highly influenced by the timing of investments input and taken out. That can be played with, so one must also take into account what return is earned by the money NOT included in the IRR calculation.

As we might expect, a single number which is intended to evaluate a very complicated series is going to be fragile.

Random thoughts. An entire MBA course could be devoted to IRR.
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