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Financial Management question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Financial Management question

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • June 16, 2021 at 2:17 pm #625446
    MookaClement
    • Topics: 1
    • Replies: 0
    • ☆

    I have been trying to solve this question for sometime now and looking answer isn’t making any sense either.

    The loan notes are currently trading at $106 and are redeemable at par in 5 years time.

    And the balance sheet extract has 12% loan notes – $1500

    Am really confused on how this 1500 was converted to the market value of $1590.

    Can you please help me out here?

    June 16, 2021 at 4:22 pm #625469
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49606
    • ☆☆☆☆☆

    On the Statement of Financial Position (we do not call it the balance sheet) loan notes are always shown at their nominal value. As I explain in my free lectures, the nominal value of each loan note is always $100 (unless specifically told otherwise).

    Therefore there are 1,500/100 = 15 loan notes, and the market value is 15 x $106 = $1,590.

    I do suggest that you watch my free lectures. They are a complete free course and cover everything needed to be able to pass the exam well.

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