Question 2 (Total = 28 marks, maximum = 25 marks) (a) Determine whether the following financial instruments should be classified as a financial liability or equity instrument of the respective companies. Give reasons for your answer. () Lemon Bhd issues 1,000,000 RM1 convertible loan stock. The loan stocks pay interest at 6.75%. The market rate for similar debt without the conversion option is 9%. The note is not redeemable, but it converts at the option of the holder into shares that will have a value of exactly RM1,100,000. [2 marks] Peppermint Bhd issues 1,000,000 redeemable preference shares for RM1.00 each. The shares are redeemable at the option of the Peppermint Bhd. The shares carry a cumulative 7% dividend. On 2 January 2020, Peppermint Bhd announces its intention to redeem the shares on 31 December 2022 for cash at 10% premium. [3 marks)