3rd Question: It May be Relevant for May 2011 Exam

Compound Financial Instrument

Question:

Spsmiter Pvt. Ltd. issued 15,000, 8% convertible debentures of100 (FV100) per debenture at par on 1^st April 2011. The debentures are redeemable at a premium of 15 % as on 31^st March, 2018 or these may be converted into Equity shares at the option of the debenture holders. In the market, the interest rate for equivalent debentures would be 11%.

            You are required to separate equity and debt portion as on 01.04.2011.

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