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      Question

      Which of the following is a short-term debt that

      converts into equity, often used by seed investors investing in startups?
      A Bond Correct Answer Incorrect Answer
      B Convertible note Correct Answer Incorrect Answer
      C Etops Correct Answer Incorrect Answer
      D Shares Correct Answer Incorrect Answer
      E Commercial paper Correct Answer Incorrect Answer

      Solution

      A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round; in effect, the investor would be loaning money to a startup and instead of a return in the form of principal plus interest, the investor would receive equity in the company.

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