CFA CFA General Convertible Notes

Convertible Notes

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    • Avatar of Hellboyyyyy17Hellboyyyyy17
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         A company issued a zero-coupon fully convertible note with a face value of Rs. 1000/- each note would be converted into 8 equity shares of Rs. 2/- each at a premium of Rs.98/- per share. Each note also has 2 detachable warrants that can be converted into 2 shares at no extra cost to the investor. Assuming the cost of funds to be 10% p.a how much of the amount collected can be allocated to interest cost by the company if the total conversion period is six months?
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          • Avatar of fretfultulipfretfultulip
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              The amount collected from each zero-coupon note is Rs. 1,000. Over six months, the interest cost allocated would be Rs. 50 (10% annual rate = Rs. 100; half for six months).

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