You can use uniroot (see ?uniroot). As an example, suppose you have a $100 bond which pays 3% every half year (6% coupon) and lasts for 4 years. Suppose that it now sells for $95. In such a case your time intervals are 0,0.5,1,...,4 and the payoffs are: -95,3,3,...,3,103. To find internal rate of return you can do the following:
> tim <- (0:8)/2 > tim [1] 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 > pay <- 3 + 0*tim > pay[1] <- -95 > pay[9] <- 103 > pay [1] -95 3 3 3 3 3 3 3 103 > f <- function(r) sum(pay*exp(-r*tim)) > z <- uniroot(f,c(0,1)) > z $root [1] 0.07329926 $f.root [1] 0.01035543 $iter [1] 5 $estim.prec [1] 6.103516e-05 So the internal rate of return is 0.07329926 (z$root) = 7.33% (continuously compound). --- On Fri, 1/8/08, Thomas E <[EMAIL PROTECTED]> wrote: > From: Thomas E <[EMAIL PROTECTED]> > Subject: [R] Code to calculate internal rate of return > To: r-help@r-project.org > Received: Friday, 1 August, 2008, 2:05 AM > Hi all. > > I am an R newbie and trying to grasp how the simple > optimization routines in > R work. Specifically, I would like some guidance on how to > set up a code to > calculate the internal rate of return on an investment > project > (http://en.wikipedia.org/wiki/Internal_rate_of_return). > > My main problem (I think) is that I want a generic code > where N (number of > periods) can be easily changed and set within the code, > > Hope this makes sense - any help appreciated !!! > > Thomas > -- > View this message in context: > http://www.nabble.com/Code-to-calculate-internal-rate-of-return-tp18757967p18757967.html > Sent from the R help mailing list archive at Nabble.com. > > ______________________________________________ > R-help@r-project.org mailing list > https://stat.ethz.ch/mailman/listinfo/r-help > PLEASE do read the posting guide > http://www.R-project.org/posting-guide.html > and provide commented, minimal, self-contained, > reproducible code. ______________________________________________ R-help@r-project.org mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.
