Five Years after the Crash in Technology Shares GMAT Reading Comprehension

Reading Passage Question

Five years after the crash in technology shares, its residual effects remain in the area of venture capital. One sign is the massive amount of new money being committed to American venture funds by investors who feel they missed, or hope to resurrect, the terrific returns of the late 1990s. Another aspect is that some of the money raised during the boom is only now being invested. The result is that startups are seeing a fast influx of financing, pushing up valuations. "There is a lot of recidivist," says the managing partner of one fund with over $2 billion under management.

America's venture capitalists put $20.4 billion into deals in 2004. Although this sum was far below the amounts of the bubble years, it marks the first increase after three years of declining investment. The biggest rise by far was in software, where investment grew from $4.1 billion in 2003 to $4.9 billion last year. In addition, money appraisals for American startups in 2004 were $13m—the highest since 2001 and a 30% increase compared with 2003.

Venture-capital funds did not invest much after the crash because good deals were scarce. Meanwhile, many veteran venture capitalists are fretting, especially now that pension funds and endowments are racing to place money in venture capital. "I am concerned that the inflow of so many dollars will result in overvaluations and inflated prices that we can't recapture on exit," rightly said Peter Barris of New Enterprise Associates, a large venture fund.

“Five years after the crash in technology shares GMAT Reading Comprehension is a sample text for the exam GMAT.

This GMAT Reading Comprehension consists of 4 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solutions and Explanations

1. According to the passage, one of the reasons for the inflow of money into the said share market is:

1. After the revival of the share market, investors opportunistically advanced their funds believing in the quick returns on money invested.
2. The promising future of the software industry pushes investors to invest money.
3. Keeping in view the massive returns of the pre-crash age, the financiers funds their money.
4. To recover their funds lost during the market downfall, the investor keenly invested their money in the share market.
5. Most veteran investors invest their vast available pension funds and endowments to gain from the market.

2. The author mentioned the word “recidivist” (Highlighted) most probably in order to

1. Explain when a market crashes, its aftershocks remain for several years
2. Stress that huge inflow of money in the market is not favorable
3. Show that managing as big funds as $2 billion is a massive responsibility
4. Identify that the investments by people in the boom period are inevitable
5. Highlight that people has started reinvesting their money in the market

3. The following can be inferred from the passage

1. The investments by the venture capitalist were significantly greater than $20 billion in 2003
2. The investments by the venture capitalist during the bubble years were greater than $40 billion
3. Money appraisals for American startups were less than 10m in 2001
4. Money appraisals for American startups were 10m in 2003
5. After the crash of the market, the scarcity of good deals was the prime reason for zero investments by venture-capital funds

4. The author's main point is to highlight that:

1. Due to the complicated nature of the share market, the investors hesitate to risk their money
2. The sudden inject of excessive money in a recovering market is unfavorable
3. During the dwindling situation of the market, the huge influx of money, although favorable, is only possible after some years.
4. Venture-capitalists played a vital role to bring back the market to its normal
5. Investors fund their money when they find good deals, without keeping in view the market situation

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