Interest rate calculations
I know there has been very detailed posts in the past regarding the differences between Yield, IRR and how to calculate them. For what I am doing however, I am a little confused on which metric I should refer to for accurate results. I am using a compound interest calculator to project future cash flows based on discounted note's I am buying.
A compound interest calculator naturally has an input field for "interest rate". My question is this: Would it be prudent to enter the "Yield" I am getting from my note, or the cumulative "IRR" calculation which is more detailed and covers the entire note from beginning to end? Note that these two calculations are rarely the same.
Which is a more accurate reflection of "interest rate" in this case?
I am simply trying to project future cash flows based on my note purchases. My thinking is Yield is the correct answer because it is the actual amount of cash I'm receiving from each payment. I'd like to hear more advanced investor feedback on what is the best way to think of this accurately.
Your thoughts?
- Josh