How the IRR is calculated:
The Mortgage Office® determines each partner’s periodic internal rate of return using cash flows that occur at irregular intervals. The IRR is calculated through an iterative search procedure that starts with an estimate for IRR, and then repeatedly varies that value until a correct IRR is reached.
Mathematically, the IRR is the discount rate that results in a Net Present Value (NPV) of zero for a series of future inflows and outflows of cash. IRR is the flip side of NPV and is based on the same principles and the same math.
Using the formula below, the rate is changed until the NPV returned is zero.
where:
di = the ith, or last, payment date
d1 = the 0th payment date
Pi = the ith, or last, payment
TIP: Statements report IRR for the statement period while the IRR displayed in the grid is always year-to-date.
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