Risk Measures
Which statement about Internal Rate of Return (IRR) is FALSE?
IRR = rate where NPV = 0. Not the same as dividend yield (dividend/price).
Complete Analysis & Legal Rationale
IRR is NOT calculated by dividing dividends by price (that formula describes dividend yield). IRR is the discount rate that equates the present value of cash inflows with the initial investment, making NPV equal to zero.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
This statement is TRUE - IRR is defined as the rate where NPV = 0.
This statement is TRUE - accept projects where IRR > required return.
This statement is TRUE - IRR helps compare different investments.
Matches the verified teaching point in the explanation.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.