Question

Most Venture Capital firms can hold an invest position in a company for up to 10 years or more. True False Under an Involuntary (Chapter 6) bankruptcy, one or more of a firm's creditors petition a court to have the company ( debtor) judged insolvent. True False Options may sell for more than their intrinsic value in the market, but should never sell for less than their intrinsic value. True False

Answer 1

Answer(1): True,

Venture capital firm is a private equity firm that provides funding to the start up companies or the new business that has higher risk. Venture capital firms charge higher interest rate.

Usually venture capital exists for five to seven years if a company is not having any liquidity issue or running out of the money, otherwise venture capital firm likes to sell their position within 8 to 10 years in case of early stage investor.

Answer(2): True,

Involuntary bankruptcy is a situation when one or more creditor files a petition with the bankruptcy court. It can be filed under chapter 7 and chapter 11. In involuntary bankruptcy, creditor files petition to judge the debtor (company) as insolvent or unable to pay.

Answer(3): True,

An option can sell above than its intrinsic value but should not trade below its intrinsic value. If option trades below its intrinsic value, arbitrageurs will try to make money tha is the reason it does not exist and if exists, it disappears soon. Intrinsic value of an option is the difference between its spot price minus strike price, it can be the option, in the money (ITM).