Chapter 24 - Financial Instruments 2 Flashcards
1
Q
Hybrid instruments
A
Instruments that are both debt and equity
E.g. Convertible Debentures
2
Q
Standard applied
A
IAS 32
Hybrid instruments are classified as both liability and equity
3
Q
Convertible bond $1000, 5% coupon redeemable in 1 year
Debt portion now if market rate is 10%
A
Principal + Interest
$1000 + $50 = $1050
Present Value = $1050 x 1/(1+0.1) Present Value (Debt portion) = $955
Equity Portion = $1000 - $955 = &45