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Extracted from the illustration in kaplan
On 1 january 2008 an entity issues a 7 year bond at par value of $300,000 and annual fixed coupon rate of 9% which is also the market rate, when LIBOR is 6%. Therefore, the instrument specific element of IRR=(9%-6%) is 3%
My question
how come the IRR is 3%? can you please explain?I understand that the IRR is the point where the total cash flows are equal to the cash outflows(the initial investment)
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