Question: QUESTION 5 (7 marks) Calculator Ltd issued a debt instrument on January 2021 with a nominal value (par value) of R 50 000 for R44

QUESTION 5 (7 marks)

Calculator Ltd issued a debt instrument on January 2021 with a nominal value (par value) of R 50 000 for R44 291.94 (i.e. at a discount). The instrument will be redeemed in three years time (i.e. 1 January 2024) at par. The coupon rate on the bond is 10% per annum.

REQUIRED:

5.1) Define a financial instrument as per IAS32. (2 marks)

5.3) Calculate the effective interest rate on the debt instrument issued by Calculator Ltd. (2 marks)

5.3) Calculate the amount of interest expense that will be charged to the Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021. (3 marks)

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