Question: She has agreed to a $ 4 0 0 , 0 0 0 , 5 - year term loan bearing interest at 4 % .

She has agreed to a $400,000,5-year term loan bearing
interest at 4%. Great Aunt Gertrude insists that the debt be convertible. She would like the
option to convert the debt principal into 100 common shares at any time prior to maturity. In
exchange for the convertible feature, the loan would bear an interest rate of 4%, as compared to
the current market rate of 6%. The principal amount of the loan would be due at the end of the
5th year from the date on which the loan agreement would be signed and interest would be
payable annually.

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