Reading a fund’s capital account
Series XIX-A case study · set 1, case 2 of 5 · 4 questions · 1 mark each
Question 1 of 4Case practice
0 right · 0 wrong · 4 to go
The case · stays here for all 4 questions
An investor has contributed ₹80 lakh to the Cedar Fund. The fund has already distributed ₹24 lakh in cash to this investor. The investor’s remaining interest is currently valued at ₹72 lakh, after all accrued fund expenses. The statement uses paid-in capital of ₹80 lakh as the denominator for every multiple. Distributed to paid-in capital (DPI) is cash distributions divided by paid-in capital. Residual value to paid-in capital (RVPI) is remaining value divided by paid-in capital. Total value to paid-in capital (TVPI) combines cash distributions and remaining value. The investor has no additional fees outside these figures. There is no information about the dates of the contributions or distributions.
The stated remaining value is an estimate, not a guaranteed exit price.
Use the definitions and net figures supplied in the passage.
Learn these topics
The written-out answers on this page are hidden while your timed set runs.
The case and its answers
Every question of this case, with its answer and why each other option is wrong.
An investor has contributed ₹80 lakh to the Cedar Fund. The fund has already distributed ₹24 lakh in cash to this investor. The investor’s remaining interest is currently valued at ₹72 lakh, after all accrued fund expenses. The statement uses paid-in capital of ₹80 lakh as the denominator for every multiple. Distributed to paid-in capital (DPI) is cash distributions divided by paid-in capital. Residual value to paid-in capital (RVPI) is remaining value divided by paid-in capital. Total value to paid-in capital (TVPI) combines cash distributions and remaining value. The investor has no additional fees outside these figures. There is no information about the dates of the contributions or distributions.
The stated remaining value is an estimate, not a guaranteed exit price.
Use the definitions and net figures supplied in the passage.
Q1What is the investor’s DPI?
Option A. 1.20×
Why it is wrong: This is TVPI, including cash and remaining value.
Option B. 0.90×
Why it is wrong: This is RVPI, using remaining value.
Option C. 3.33×
Why it is wrong: This reverses numerator and denominator.
Option D. 0.30× — Correct answer
Answer: D. DPI = ₹24 lakh ÷ ₹80 lakh = 0.30×. The investor has received cash equal to 30% of contributed capital. The remaining marked value is excluded from DPI. Remember: DPI measures value already distributed.
Hint, shown before you answer in practice mode: Use only cash already distributed in the numerator.
XIXA-S1-C02-Q1easynumerical
Q2What is the investor’s RVPI?
Option A. 0.90× — Correct answer
Option B. 0.30×
Why it is wrong: This uses distributions instead of residual value.
Option C. 1.20×
Why it is wrong: This adds distributions to the residual value.
Option D. 0.10×
Why it is wrong: This measures the gap between paid-in capital and residual value.
Answer: A. RVPI = ₹72 lakh ÷ ₹80 lakh = 0.90×. It measures the remaining estimated value relative to contributed capital, not cash already received. Remember: RVPI depends on the valuation of unsold investments.
Hint, shown before you answer in practice mode: Use the current value of the remaining interest.
XIXA-S1-C02-Q2easynumerical
Q3What is the investor’s TVPI?
Option A. 1.20× — Correct answer
Option B. 1.30×
Why it is wrong: This is not the ratio of the supplied total value to paid-in capital.
Option C. 0.60×
Why it is wrong: This subtracts distributions from remaining value.
Option D. 0.90×
Why it is wrong: This omits cash already distributed.
Answer: A. TVPI = (₹24 lakh + ₹72 lakh) ÷ ₹80 lakh = 1.20×. It also equals DPI 0.30× plus RVPI 0.90×. Remember: TVPI includes both realised and unrealised value.
Hint, shown before you answer in practice mode: Add cash received and the remaining interest before dividing.
XIXA-S1-C02-Q3mediumnumerical
Q4Can the distributor calculate a reliable annualised IRR from this statement alone?
Option A. Yes. Divide the remaining value by the distribution.
Why it is wrong: That ratio is unrelated to cash-flow timing.
Option B. Yes. TVPI of 1.20× always means a 20% annual IRR.
Why it is wrong: A multiple does not include the holding period or intermediate dates.
Option C. No. The timing of the cash flows is missing. — Correct answer
Option D. No. Private funds can never have an IRR.
Why it is wrong: IRR can be calculated when suitable dated cash flows are available.
Answer: C. The statement supplies amounts but no dates. IRR depends on when money goes in and comes out, so the same 1.20× multiple can correspond to different annualised returns. Remember: A multiple and an annualised return answer different questions.
Hint, shown before you answer in practice mode: A one-year result and a ten-year result can have the same multiple.
XIXA-S1-C02-Q4mediumapplication
Checking fee bases before comparing products
The next case in this set. Read its story first, then answer.
Next casePaper Trading Try it on the practice trading desk