Chapter 12- Convertibles and Warrants

Dear Sir John, first of all i’d like to thank you a thousand times for such nice lectures, i need to say that i passed F1-F3 & F5 ( 1st attempt) listening to only your lectures without any tuition elsewhere. I continued as a self study student and by the grace of God I’m now doing F9. I Thank God again it’s you as lecturer.

My question is on page 71 eg 1. The return on debentures is 10% and I see in the answer as well the D.F is 10%, however the numbers reflect 8% both for the annuity and the PV.

so my answer is as follows

1 – 3 : Interest 8 p.a. at a D.F of 10% = 8 * 2.487 = 19.896
3 Redemption := 110.25 * 0.751 = 82.80

MV = 19.896 + 82.80 = 102.70.

That’s a very minor difference but my main issue is whether for discounting at PV we take the % “return” (10%) rather than the interest paid on nominal value (8%)

Thanks