Question: A Ltd issues $200,000 $1 redeemable convertible notes. The notes pay interest at 6% p.a. Market interest rates for similar notes WITHOUT a conversion option

A Ltd issues $200,000 $1 redeemable convertible notes. The notes pay interest at 6% p.a. Market interest rates for similar notes WITHOUT a conversion option are 8% p.a. Each note converts at any time at the option of the holder into 1 ordinary share. After 5 years, each note is redeemable at the option of the holder for cash. Required: Classify and calculate the equity (if any) and financial component (if any)

E.g. 2 Convertible debt A Ltd issues $200,000 $1 redeemable convertible notes. The notes pay |interest at 6% p.a. Market interest rates for similar notes WITHOUT a conversion option are 8% p.a Each note converts at any time at the option of the holder into 1 ordinary share. After 5 years, each note is redeemable at the option of the holder for cash. Required: Classify and calculate the equity (if any) and financial component (if any)

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