An enterprise issues 2,000 convertible bonds at the start of Year 1. The bonds have a threeyear
term, and are issued at par with a face value of Rs.1,000 per proceeds of Rs.2,000,000. Interest is payable annually in arrears at ab onnodm giniaviln agn tnoutaall interest rate of 6%. Each bond is convertible at any time up to maturity into 250 common
sWhhaerens .t he bonds are issued the prevailing market interest rate for similar debt without
icnostnruvmeresiontn. oThpeti oenffse ics 9ti%ve. Trhaete e cntoitnys hidaesr iinngcu trhreed is sRusa. 1n0c0e,0 c0o0 sat so isf sdueabntc ies 1c1o%st po.fa c. ompound RDeeqteurimreidn:e – t he debt and equity component? PPaassss nneecceessssaarryy ddoouubbllee eennttrriieess faotr athlle t hmea tthurreitey ydeaaters ?if the investor exercises cash option Eoxr ashmaprele o-2p tion?
