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last minute help please I have been working on this most of the day it doesn’t make sense
Bertrand (BPP mock exam)
Calculate capital repayable as capital * 0.79 (final year discounting rate )
Some questions Peterlee for example is Capital + interest payable * (final year disc rate)
Am I missing something
Are you sure that the interest on these loans is payable in arrears? It sounds to me like in Peterlee, interest is payable in arrears whereas in Bertrand it sounds like it’s payable in advance
Hi Mike. Thank you so mucch for getting back to me. I thought it would be something like that.
Pingway June 08
on 1 April 20X7 Pingway issued $10m 3% convertible loan note at par interest payable annually in arreas. 3 years later loan convertibleAnswer $10m * 0.79 (3rd year)
different question on Jan 20×0 jedders issued $15m 7% convertible loan note convertible after 5 years 31 Dec20x4
This question then $15m + 1050 (interest) * 0.62 (year 5 discount)
Plus it is quiet about paying in advance or in arreas.Hmm – that’s a problem. The present value of the redemption is just the capital value when interest is payable in advance. when interest is payable in arrears, the present value of the final payment is the capital value + the interest for the final year.
Check out that Jedders question again – somewhere in the question it should tell you the interest payment dates
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