New Click here to Enroll in NaBFID Analyst Intro Class on May 6

    Question

    From the below statements identify which one best

    describes a Convertible Note?
    A Currency notes used during the foreign travel and those can be converted into the domestic currency of any country. Correct Answer Incorrect Answer
    B A type of debt instrument that is not secured by physical assets or collateral. Correct Answer Incorrect Answer
    C An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Correct Answer Incorrect Answer
    D Financial instrument issued by a start-up company which is convertible into equity shares of such start-up company. Correct Answer Incorrect Answer
    E A type of structured asset-backed security. Correct Answer Incorrect Answer

    Solution

    A convertible note is a type of short-term debt financing commonly used by startups to raise capital from investors. It is a debt instrument that can be converted into equity (shares of stock) at a later time, usually at the occurrence of a specific event, such as the next round of funding or a liquidity event like an IPO or acquisition.

    Practice Next

    Relevant for Exams: