# Definition for : Internal rate of return, IRR

GLOSSARY LETTER

The Discounting rate that makes Net present value equal to zero is called the internal Rate of return or Yield to Maturity (the IRR is applied to capital expenditure and the YTM to financial securities). IRR is used in Investment choice: if the IRR of the Investment is higher than the Required rate of return then the Investment should be realised.

(See Chapters 17 and 18 of the Vernimmen)

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