- November 25, 2015 at 2:37 pm #285200honoriaMember
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from BPP revision kit June 2015. question 48 MCQ number 2.
an 8% $30 million convertible loan note was issued on April 20X5 at par. interest is payable in arrears on 31 March each year. The loan note is redeemable at par on 31 March 20×8 or convertible into equity shares at the option of the loan note holders on the basis of 230 shares for each $100 of loan. A similar instrument without the conversion option would have an interest rate of 10% per annum.
the present values of $1 receivable at the end of each year based on discount rates of 8% and 10% are;
end year 1 0.93 0.91
2 0.86 0.83
3 0.79 0.75
what amount will be credited to equity on 1 April 20×5 in respect of this financial instrument. please explain your working for meNovember 25, 2015 at 4:42 pm #285242MikeLittleKeymaster
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Find the present values of the interest and capital repayments by applying the 10% discount factors
Add them up, deduct from $30 million and the answer should be the amount created to equity
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