Hey guys, I just noticed that when you use the XIRR function, the formula ALWAYS assumes that you are discounting the cash flows based on a 365-day year.
It’s been a while since I left college, so maybe this is a stupid question. But how can I convert the resulting rate of return into a rate based on a 30/360 convention?
For example, let’s take a look at the simple cash flow attached, where I use a 10% yearly NOMINAL rate (or 5% per semester).
If I use the XIRR function, I get an EFFECTIVE yearly rate of return of 10.238%; which can be converted into a NOMINAL rate by using the “nominal” formula, giving you a NOMINAL yearly rate of return of 9.989%.
It is clear that in the example, a 5% nominal rate per semester implies a 10% yearly nominal rate, and a 10.25% EFFECTIVE yearly rate. But this is under a 30/360 convention!
So how can I do to convert the 10.238% into 10.250%? Which it would be the same than using a 30/360 convention with the XIRR function if this function allowed to do that?
Thanks!
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