If a portfolio manager had to estimate the fair value of private equity funds invested in a young,privately-held start-up company,which of the following would he/she most likely identify as the level of inputs to determine this?
A) Level 1.
B) Level 2.
C) Level 3.
D) None of these.

Question

Quizplus · Accepted Answer

The fair value of private equity funds invested in a young, privately-held start-up company would most likely be determined using Level 3 inputs because these are unobservable inputs and would require significant judgement and estimation. Level 1 inputs are quoted prices in active markets, while Level 2 inputs are observable but not active market prices. Therefore, neither Level 1 nor Level 2 would be appropriate for determining the fair value of an investment in a private start-up company.

If a Portfolio Manager Had to Estimate the Fair Value