How come here it’s assumed total return method 1 while calculating carried interest? In review class, sir mentioned that if nothing is mentioned we should consider method 2 right? Please explain.
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We are not given any certain % Which is required in the method two according to the notes so the solution is correct we will be using method one itself because in the other method it is stated that carried interest will be paid when NAV of the fund exceeds invested capital plus a certain percentage and we aren’t given that percentage in this sum.
So the method that should be used as a method number one I think you are confusing method one which method two maybe.