Ishmail Co Bpp essential reading

Dear Tutor Please explain the following example. Ishmail Co issues $20m of 4% convertible loan notes at par on 1 January 20x7. The loan notes are redeemable for cash or convertible into equity shares on the basis of 20 shares per $100 of debt at the option of the loan note holder on 31 December 2011. Similar but non-convertible loan notes carry an interest rate of 9%. The present value of $1 receivable at the end of the year based on discount rates of 4% and 9% can be taken as: End of year 1. 0.96(4%) 0.92(9%) 2. 0.93 0.84 3. 0.89 0.77 Cumulative 2.78 2.53 Show how these loan notes should be accounted for in the financial statements at 31 December 20x7. Statement of profit or loss Finance costs (W2) 1,568 Statement of financial position Equity – option to convert (W1) 2,576 Non-current liabilities 4% convertible loan notes (W2) 18,192 Workings 1. Equity and liability elements -3 years interest (20,000 × 4% × 2.53) 2,024 -Redemption (20,000 × 0.77) 15,400 -Liability element 17,424 -Equity element (?) 2,576 Proceeds of loan notes 20,000 2.Loan note balance Liability element (W1) 17,424 Interest for the year at 9% 1,568 Less interest paid (20,000 × 4%) (800) Carrying value at 31 December 2009 18,192 I don't understand why do we multiply three years of intrest as the question states to show the loan notes at the end of year of 20x7 and not three years after. I also dont understand why on redemption we multiply 20.000*0.77 ? Thank you!