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Ct1 Chapter 10 project appraisal April 2007 question 6

A

Ashwini

Member
Here in sub-question 1 we are asked to calculate money-weighted rate of return, so my doubt is how do we select the interest values for interpolation? In the solution they have used 5% and 4.5%. Can I use any other values?
 
The first rate you take will give you an idea of what the second possible rate can be.

One can take any interest rate to begin with, say 5% or 10%. The value of the equation you obtain by using this rate will help you in deciding what the next trial rate should be.

Finally, interpolate the 2 rates that give the closest answers to the equation to reach to the final rate.
 
Aditya mohan mathur said:
The first rate you take will give you an idea of what the second possible rate can be.

One can take any interest rate to begin with, say 5% or 10%. The value of the equation you obtain by using this rate will help you in deciding what the next trial rate should be.

Finally, interpolate the 2 rates that give the closest answers to the equation to reach to the final rate.
Click to expand...
Oh okay got it. Thank you!!
 
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