Use the Information for the Question(s)below

question 78

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.
-Suppose you sold the 1 million shares to the angel investor for $500,000.What was your percentage ownership in the company immediately following the angel investor's investment?

• A)50%
• B)33.3%
• C)66.7%
• D)100%

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Definitions:

TED Spread

The difference between the interest rates on three-month U.S. Treasury bills and three-month Eurodollars having identical expiration dates, serving as an indicator of credit risk in the general economy.

LIBOR

The London Interbank Offered Rate, once a benchmark interest rate at which major global banks lend to one another.

Treasury-Bill Rate

The interest rate yield on U.S. government short-term debt securities known as treasury bills.

Reward-to-Variability Ratio

This ratio, often called the Sharpe ratio, measures the return of an investment relative to its risk, whereby a higher ratio indicates a more desirable outcome.