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ACCA P2 IFRS 9 Convertible debentures
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How do you get the 7.67%?
I just realised the effective rate of interest on the debt of 7.67% shown in the lecture is different from the notes which is 6.34%.
yes i think he did the mistake . of not using 6.34%
Completely lost towards the middle and end of these calculations (the issue cost !)
I found on the forum that the correct answer is in the notes – it also gives “nil” if you start with 90,4.
i am confused between answer in lecture and the notes. in lectures it is easy to understand, but now i don’t which one is the correct answer.
This lecture doesn’t match the answer in the P2 notes.. Something has gone wrong somewhere.
I think when calculating with the effective rate of 7.67%, instead of using 93.85, we need to use 94.8 for the b/f figure for the liability component. So by the end of Yr 3, the balance c/f will equal not to NIL, but to the Equity Component figure of approximately 5.15 to 5.38 (rounding error).
There’s sth wrong with the calculation for convertible debentures example.. it’s not the same as solutions in the lecture notes..
Hi Sir, the concept I have of convertible bonds is that, they usually have a lower rate of return compared to similar bonds with no conversion option & that is because of the added advantage of equity option in the bond.
Keeping this in mind, I thought that we calculate the present obligation by calculating PV of future cash flows, discounting them by the rate of the convertible bond, but as you mentioned that the rate of a similar non-convertible bond will be used for discounting, I don’t understand why not the rate of convertible bond is used in discounting?
Thought the issue cost was suppose to be net with the proceeds? So you would use 99 instead of 100?