Covertible loan

What figure did you arrive at? And what are the choices? I calculate it to be around $127,000

these options are available A $160,000 B $200,000 C $120,000 D $270,000 My question is how to deal with premium in convertible bond ???

And what does the solution say is the correct answer? I've recalculated my figures using the rounded discount factors given in the question and have arrived at $122,000 (rounded)

I dont have solution that is why i put this question on this page option c is correct answer but i dont know how ??? will you please define how you calculated ???

You'll need to set up a table showing the cash payments necessary to service this loan So the table will show the amounts due to be paid, the dates of payment, the discount factor (1 year, 2 years ....) at 14% The amounts due to be paid will be the interest at the end of each year calculated as 8% x the value of the loan together with the face value of the loan at the end of the fourth year + the 10% premium Extend all the rows and add the final column to arrive at the present value of those payments Now, in a new table, left hand column put that present value at the top of the column Then calculate interest at 14% in column 2 Then in column 3 put in the actual interest to be paid, in brackets, calculated as 8% on the face value of the loan Now add across and put that resulting figure on line 2 of column 1 Repeat for 4 years and you should arrive at a figure somewhere close to $1,100,000 ie the face value of the loan together with the 10% premium Now all you have to do is work out the finance charge (column 2) for that year ended 31 December 2016 I'll leave you to work out a way of allocating interest into that calendar year because the loan was borrowed on 1 July, not on 1 January so there's going to be some arithmetic agility to arrive at the calendar year finance costs Where's this question from? Have I just done your homework?