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Dear Mike,
As per O.T F7 Course notes – Chp 28 Finance Liabilities – Convertible instruments. To be able to separate the equity element from the debt element, we need to calculate the P.V of the cash flows for each of the years and the total of P.V substract it from face value. The difference would be Equity part.
The only Discounted Factor to use as per your notes to calculate P.V is the effective interest.
Why is the Nominal Interest Discounted factor given on the Question too? Is there any use of the Nominal Interest Discounted factor on the questions that is not reflected on the course notes?
Thank you very much for your help.
Regards,
Isabel
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