The tutor brings up what he finds a fascinating concept: internal rate of return.

The way I understand it, the internal rate of return is the interest rate that would make possible an exact sequence of deposits and withdrawals, with ending balance zero. Consider the following question:

An investor buys a house for $130K. One month later, he puts another $60K into the house. Two months after that, he sells the house for $215K. Finally, one month after that, he pays $7.5K in various closing costs, etc. What is his internal rate of return (IRR)?

Solution:

Paying out is negative; receiving is positive.

We obtain the answer from the HP 10B as follows:

1. Press __ INPUT.
2. Key in 12 then press __ PMT.
3. Key in 130000 then the +/- key, then CF_j.
4. 60000 +/- CF_j
5. 0 CF_j
6. 215000 CF_j
7. 7500 +/- CF_j
8. Now, to get the annual internal rate of return, key __CST

In this case, I get the answer 40.53, which means the developer is making 40.53% (equivalent annual rate) on his money (this time:)).

While real estate investing is risky and tricky, I hope you’ll agree that finding the internal rate of return (IRR) with the HP 10B is straightforward.

Source:

Hewlett-Packard Business Calculator Owner’s Manual. Corvallis: Hewlett-Packard,
   1988.

Jack of Oracle Tutoring by Jack and Diane, Campbell River, BC.