Is there anyway to workout this IRR with pen and paper or do I need a computer?

Question

For the following question (part a), do I need a computer to calculate this IRR or can it be done via pen and paper? I have found the sale price at Y10 to be $78.81 and looking at the IRR as the discount rate that makes NPV = 0.

Question a)

bonds

Question a)

D Stanley · Answer

You don't need a computer, but you can't easily do it by hand either. You could use a financial calculator's "bond" function with the following parameters (parameter names are for the TI BA-II):

N =  10
 PV = -100
PMT =  5
 FV =  78.81

and solve for I/Y, which gives you 3.1656%.

You's essentially calculating the yield of a 10-year bond that pays 5 per year, bought for 100, that gives you 78.81 at the end of the bond term.

Is there anyway to workout this IRR with pen and paper or do I need a computer?

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