Use the Information for the Question(s) Below

question 39

Multiple Choice

Use the information for the question(s) below.
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you
received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are
now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would
receive 2 million newly issued shares in return.
-After the venture capitalist's investment, the post-money valuation of your shares is closest to?

• A) $4.0 million
• B) $5.0 million
• C) $12.5 million
• D) $2.5 million

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Definitions:

Framing Bias

A cognitive bias where people decide on options based on whether the choices are presented with positive or negative connotations.

Positively Correlated

A relationship between two variables where they move in the same direction, meaning as one variable increases, the other does as well.

Trading Activity

The volume or quantity of buying and selling transactions in a financial market over a specific period.

Average Returns

The mean financial return of an investment over a given time period, calculated by summing the returns of each period and dividing by the number of periods.