Convertible Loan Notes

Good Evening, I am stuck on the following question and hope you can help. My question is, when calculating the repayment in year 3, is the '0.75' derived from the present value interest rate for year 3 and if so, why? If not, where does this 0.75 come from? (Prepare of P&L, B/S, and changes in Equity to 31 march x6. Equity shares of 50 cents each = $56m) The 8% $30m convertible loan note was issued on 1 april x5 at par. Interest is payable annually in arrears on 31 march each year. The loan note is redeemable at par on 31 march x8 or convertible into equity shares at the option of the loan note holders on the basis of 30 equity shares for each $100 of loan note. The Finance Director has calculated that to issue an equivalent loan note without the conversion rights it would have to pay an interest rate of 10% per annum to attract investors. The present value of the $1 receivable at the end of each year based on the discount rates of 8% and 10 % are: 8%: Year 1 - 0.93% Year 2 - 0.86% Year 3 - 0.79% 10% Year 1 - 0.91% Year 2 - 0.83% Year 3 - 0.75% Answer: As this is a convertible loan note it has to be split between debt and equity: Interest years 1-3 (2400 x (0.91 + 0.83 + 0.75) = $5,976 Repayment year 3 (30,000 x 0.75) = $22,500 Liability component (5,976 + 22500) = $28,476 Equity Component = $1,524 ( I assume this is calculated thus 30m loan notes less 28,476, as my text book doesn't tell me). Cash received (28,476 + 1,524) = $30,000 Liability component = $28,476 Interest (28,476 x 10%) = $2,848 Less interest paid = ($2,400) Balance as at 31.3.x6 = $28,924 I know this may seem like a pretty straightforward question, but as the answer doesn't tell you where the '0.75' comes from, i'd rather not assume. Thank you for your help. Simone