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Hello Sir
can you plz explain how to calculate the conversion premium.
The current market price of company is $2.4
KB Co might raise the $5,040,000 required by means of an issue of
convertible loan notes at par, with a coupon rate of 6%. The loan notes would be redeemable in seven years’
time. Prior to redemption, the loan notes may be converted at a rate of 35 ordinary shares per $100 nominal.
Required
(i) Explain the term conversion premium and calculate the conversion premium at the date of issue
implicit in the data given.
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