The equation is correct for i* 4.1% per quarter, which is a nominal 16.4% per year, compounded
quarterly.
Solution by Spreadsheet
Once all the cash flows are entered into contiguous cells, the function IRR (B2:B42) is used
in Figure 7–13, row 43, to display the answer of a nominal rate of return of 4.10% per quarter.
(Note that many of the row entries have been hidden to conserve space.) This is the same as the
nominal annual rate of
i* 4.10%(4) 16.4% per year, compounded quarterly
Gerry did well on his bond investment.