IRR/NPV Question for all... synonymous, determine, following, interest, account

ruchita

Which of the following is least accurate?
a) In the study of bonds, the internal rate of return is synonymous with the yield to maturity
b) The internal rate of return is the timeweighted rate of return on the portfolio, taking account of all cash flows
c) Internal rates of returns and internal rate of return rankings are not affected by any external interest rate b/c a project’s cash flows alone determine the internal rate of return
d) When the NPV and the IRR rules rank mutually exclusive investments differently, we should follow the NPV rule b/c it directly relates to shareholder wealth maximization

hariRaj

Yes, I agree that it is B. From reading 6, “In investment management applications, the internal rate of return is called the moneyweighted rate of return because it accounts for the timing and amount of all dollar flows into and out of the portfolio.”

sameeragarwal

gotta be B.

DarienHacker

definitely b…

ba736

B is the answer!
What a way to spend a Saturday night… CFA questions!

maxmeomeo

Wouldn’t B have been duration?

ajpheif16

Duration is the measure of interest rate risk.

infinitybenzo

It is C.
Interest rates determine the yield to maturity.

LiquidAssets10

Because the coupons received have to be reinvested. Right?

dandman

No, I think it’s B too. It is true that the coupons have to be reinvested but they are assumed to be reinvested at the YTM. Interest rates play no role.