An investor shall understand the difference between XIRR (extended internal rate of return) and coupon rate of returns. Usually, XIRR is higher than the coupon rate and investors shall always compare XIRR of different options of NCDs. Generally, XIRR is greater if the cash flows are more regular. Let’s understand this with help of an example. Let’s say Company X is offering an NCD for coupons of 10% with monthly interest payouts and Company Y is also offering NCD for the same coupon rate i.e 10% but interest payout is on a quarterly basis. Now in this example, XIRR from NCD of Company X would be 10.47% and XIRR of Company Y NCD would be 10.30%. This shows that Returns from Company Y are higher as compared to Company X. Though in this example there is a slight difference but if the time period is greater, the difference could be higher.