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Dear Sir,
Why this sentence is false :
” the linear interpolation approach is necessary to calculate IRR precisely”
It is 1 question in mock exam of Opentuition .Will this sentence be true without wording “precisely” ?
Thank youAs I do explain in my lectures, the linear interpolation approach will only give an approximation to the IRR because the relationship is not linear.
The statement would not be true even if the the word precisely was missing. If the flows were equal amounts in perpetuity then we do not need the linear interpolation approach because we can calculate the IRR precisely (the annual flow divided by the initial investment).
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