MOIC to IRR conversion: Doubling your money in 4 years corresponds to which approximate IRR?

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Multiple Choice

MOIC to IRR conversion: Doubling your money in 4 years corresponds to which approximate IRR?

Explanation:
Doubling your investment over a 4-year horizon is about finding the annualized growth rate that turns 1 into 2 in four years. That means solving (1 + IRR)^4 = 2. Taking the fourth root gives IRR = 2^(1/4) − 1. Numerically, 2^(1/4) ≈ 1.1892, so IRR ≈ 0.1892, or about 18.9%. So the IRR is roughly 19%, which is closest to 20% among the given choices. A quick cross-check with the Rule of 72 (rough mental math) would yield around 72/4 ≈ 18%, reinforcing that the answer sits near 20%.

Doubling your investment over a 4-year horizon is about finding the annualized growth rate that turns 1 into 2 in four years. That means solving (1 + IRR)^4 = 2. Taking the fourth root gives IRR = 2^(1/4) − 1.

Numerically, 2^(1/4) ≈ 1.1892, so IRR ≈ 0.1892, or about 18.9%. So the IRR is roughly 19%, which is closest to 20% among the given choices. A quick cross-check with the Rule of 72 (rough mental math) would yield around 72/4 ≈ 18%, reinforcing that the answer sits near 20%.

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