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- This topic has 3 replies, 2 voices, and was last updated 8 years ago by MikeLittle.
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- February 20, 2016 at 1:42 pm #301247
On 1 October 20X3 Bertrand issued $10 million convertible loan notes which carry a nominal interest
(coupon) rate of 5% per annum. The loan notes are redeemable on 30 September 20X6 at par for cash or
can be exchanged for equity shares. A similar loan note without the conversion option would have required
Bertrand to pay an interest rate of 8%.
The present value of $1 receivable at the end of each year based on discount rates of 5% and 8% can be
taken as:
5% 8%
End of year 1 0.95 0.93
2 0.91 0.86
3 0.86 0.79here u take 10m into the coupon rate which is 5%, i can understand this, then why do you take 500k* the discounts factors of 8% it should be 5 nah?
February 21, 2016 at 11:39 am #301371Please give me a question reference – then I can make sense of what you are writing!
February 21, 2016 at 4:49 pm #301446They’re asking how would the convertible loan note appear in SOFP on initial recognition.?
February 21, 2016 at 6:13 pm #301464It would appear as a liability of $9,190 and an element of “Other equity” of $810
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