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Hello Tutor,
To convert ARD to JPY why the rate 0.70 is used and not 0.74.
Washi Co is buying JPY and selling ARD.Or do we have to interpret it in this way : He is investing in ARD , therefore he is selling JPY and buying ARD.
Thank you.
Another question : march 2018 Tippletine Co
1 b) I find part b difficult. But it was simply to discuss the adv & disad of convertible loan notes.The other shareholders may be concerned by the interest rate on the convertible notes being Tippletine Co’s normal cost of borrowing. The option to convert is an advantage for convertible loan note holders. They would often effectively pay for this option by receiving a lower rate of interest on the loan notes.
Can you please explain this to me. How come they receive a lower rate of IR?
In future please do start a new thread when you are asking about a different question – it is because our answers are for the benefit of everyone (many students use the search box to see if their problem has already been dealt with).
When companies issue debt, one way of being able to pay lower than normal interest rates is to offer a premium on redemption – overall the investors will be getting a similar return.
One way of potentially giving a premium on redemption is to issue convertibles – the investor has the possibility of getting a big premium on redemption.Do watch my free Paper FM lecture on convertibles where I explain this point.
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