Calculating Return

Question 1

Discrete compounding- would calculate the total return for two time periods like this. Assuming 1st period saw 20% growth and 2nd period saw 10% growth, total return would be…

Answer 1

1.32
By showing first period as 1.2 and second period as 1.1, then multiplying against each other.

Question 2

Continuously compounded returns are determined more simply.
Say you had 20% growth 1st period and 10% growth 2nd period, you would just …

Answer 2

Add that growth up to get total continuously compounded returns are determined of 30%.

Question 3

Continuous compounding is an ___ tool for many investors and has limited accuracy projecting ___ performance expectations.

Answer 3

Uncommon; long-term

Question 4

Traditional Rate of return formula for traditional investments

Answer 4

Rate of return=(change in price+cash flows)/initial price

Question 5

Distribution to paid-in (DPI) ratio

Answer 5

Question 6

Residual value to paid-in (RVPI) ratio

Answer 6

Question 7

Total value to paid-in(TVPI) ratio

Answer 7

Question 8

Public Market Equivalent (PME) method uses a publicly traded securities index that __.
PME method uses the investment’s contributions (calls), distributions, and ___.
PME method uses the returns of the public market index as ___.
The resulting output will look similar to the TVPI that is represented as ____.

Answer 8

Is believed to have a similar risk exposure to the fund as a return target and finds the corresponding premium over the selected index.
Terminal value in performing the calculation.
As a base for the fund’s reinvestment rate and opportunity cost of capital.
A multiple. A multiple of 1.0 implies the private investment generated the same returns as the public markets.