The abstract is generated by AI## Why Is It Necessary to Look at IRR When Investing in Bonds? This Number Better Explains True Returns Than Interest
If you're considering buying bonds, two key indicators might confuse you: **interest (cupón)** and **IRR (Internal Rate of Return)**. Most people only look at the interest and end up losing out. Let’s clarify.
Imagine two bonds in front of you: Bond A pays 8% interest annually, but has an IRR of only 3.67%; Bond B pays 5% interest annually, but has an IRR of 4.22%. If you only look at the interest, you would definitely choose A. But in reality, B is the more profitable choice.
View OriginalIf you're considering buying bonds, two key indicators might confuse you: **interest (cupón)** and **IRR (Internal Rate of Return)**. Most people only look at the interest and end up losing out. Let’s clarify.
Imagine two bonds in front of you: Bond A pays 8% interest annually, but has an IRR of only 3.67%; Bond B pays 5% interest annually, but has an IRR of 4.22%. If you only look at the interest, you would definitely choose A. But in reality, B is the more profitable choice.
