New Enroll in RBI Grade B New Batch - Starts on May 21

    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.

    Practice Next

    Relevant for Exams: