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Hey
Looking through the excel file examples, on the knowlwdge base, I figured that whenver the XIRR is computed to get the effective interest rate, the interst is calculated using the compound interst formula, rather than simple interest.

This doubt came out when I was computing the interest rate implicit in the lease, to discount my lease payments.

Should I use the compound interest formula to calculate interest whenever I get the effective interest rate throught XIRR?.

Anothr question is when there is only an incremental borrowing rate, is is convenient to use simple interest formula to calculate the interest?

Hi, as far as I know, XIRR uses annual compounding and it’s considered fine in all accounting computations. I’m probably not the best partner in this discussion, as I find all the differences between interest calculation conventions totally immaterial

Thank you Marek

There is some difference but not substantial.