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How to derive at book value of debt in Year 1 ? If $43342 is derived from closing balance of 8% bond in Year 1 + $20m, why the $20m on 6% convertible loan no need to take into account interest payment of $1200 ?
For the 8% bond there is an equal repayment each year covering the interest and the principal.
For the 6% bond, it is not until year 5 that the principal is repaid (or it is converted) so there is only the interest each year.
In each case the interest is paid each year and so in each case there is only the remainder of the principal owing at the end of each year, which in the case of the 6% bond is the full $20,000.
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