Presenting a valuation change fairly
Series XIX-A case study · set 2, case 4 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
Juniper Fund’s last quarterly statement valued an investor’s units at ₹150 lakh. A new independent valuation reduces the value to ₹120 lakh after a portfolio company loses its largest customer. No cash has been distributed, and there have been no new contributions. The distributor receives the revised report before speaking to the investor. The fund manager explains that the company is seeking new customers, but has no signed replacement contract. A marketing colleague proposes continuing to quote ₹150 lakh until the next brochure is printed and describing recovery as certain. The distributor’s internal policy requires using the latest approved valuation, explaining material changes and keeping a record of the communication.
Apply the stated internal policy for this case.
Both values are hypothetical valuation estimates.
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.
Juniper Fund’s last quarterly statement valued an investor’s units at ₹150 lakh. A new independent valuation reduces the value to ₹120 lakh after a portfolio company loses its largest customer. No cash has been distributed, and there have been no new contributions. The distributor receives the revised report before speaking to the investor. The fund manager explains that the company is seeking new customers, but has no signed replacement contract. A marketing colleague proposes continuing to quote ₹150 lakh until the next brochure is printed and describing recovery as certain. The distributor’s internal policy requires using the latest approved valuation, explaining material changes and keeping a record of the communication.
Apply the stated internal policy for this case.
Both values are hypothetical valuation estimates.
Q1What is the decline in the reported unit value?
Option A. 20% — Correct answer
Option B. 25%
Why it is wrong: This divides the loss by the new value rather than the starting value.
Option C. 0%
Why it is wrong: A valuation loss exists even without a sale.
Option D. 30%
Why it is wrong: This treats the ₹30 lakh loss as a percentage without a denominator.
Answer: A. The decline is (₹150 lakh − ₹120 lakh) ÷ ₹150 lakh × 100 = 20%. It is a change in reported value, not proof of a completed cash sale. Remember: Measure percentage changes against the starting value.
Hint, shown before you answer in practice mode: Use the original ₹150 lakh as the percentage base.
XIXA-S2-C04-Q1easynumerical
Q2Which figure should the distributor use under the stated policy?
Option A. The simple average of ₹150 lakh and ₹120 lakh.
Why it is wrong: The policy does not permit averaging old and new values.
Option B. Zero, because every customer loss destroys all value.
Why it is wrong: The new independent valuation is ₹120 lakh, not zero.
Option C. The latest approved ₹120 lakh valuation, with context. — Correct answer
Option D. ₹150 lakh until the brochure is reprinted.
Why it is wrong: The policy requires the latest approved valuation, not the printing schedule.
Answer: C. The revised approved report is the relevant valuation under the internal policy. The distributor should explain what changed and the limits of valuation estimates rather than preserve the old marketing number. Remember: Communicate current approved information.
Hint, shown before you answer in practice mode: The policy identifies which valuation is current.
XIXA-S2-C04-Q2easyapplication
Q3How should the recovery plan be described?
Option A. As a certain recovery to ₹150 lakh.
Why it is wrong: The passage provides no replacement contract or guarantee.
Option B. As a completed exit from the company.
Why it is wrong: The company remains in the portfolio.
Option C. As an uncertain plan to find replacement customers, with no signed contract yet. — Correct answer
Option D. As proof that the independent valuation is fraudulent.
Why it is wrong: A plan to recover does not establish misconduct in the valuation.
Answer: C. Management is trying to replace lost business, but success has not been established. The absence of a signed contract prevents the distributor from presenting recovery as certain. Remember: Distinguish forecasts and plans from established facts.
Hint, shown before you answer in practice mode: Separate an action plan from an achieved outcome.
XIXA-S2-C04-Q3mediumapplication
Q4Which record best supports a responsible investor discussion?
Option A. A note that the investor has been guaranteed recovery.
Why it is wrong: Such a guarantee is unsupported by the facts.
Option B. A dated note of the revised valuation, its stated cause, uncertainties and the information shared. — Correct answer
Option C. No record because the decline is unrealised.
Why it is wrong: The policy requires a communication record despite the lack of a sale.
Option D. A record containing only the old brochure.
Why it is wrong: It would omit the new valuation and material development.
Answer: B. A clear dated record makes the explanation traceable and documents that the investor received the material change and its limitations. It does not turn the valuation into a guarantee. Remember: Maintain an evidence-based communication record.
Hint, shown before you answer in practice mode: Record both the update and the remaining uncertainty.
XIXA-S2-C04-Q4mediumapplication
A tax illustration with explicit assumptions
The next case in this set. Read its story first, then answer.
Next casePaper Trading Try it on the practice trading desk