11. [Foreign currency convertible debt] In April 2000, Roche 15- sued nearly 105 billion of deht, convertible into Roche sharesThe coupon was .25% with a maturity of 2005 The issuc price was 96.4% of par value (face amount) The conversion price was set at a premium of 25% above the market price of Roche shares at the issue date

a. Describe the benefits to Roche of issuing these bonds rather than full-coupon nonconvertible debt.

b. Describe how you would compute the interest expense for 2000 and the carrying amount of the bond (in yen) at Decem- ber 31, 2000.

c. Describe the effect of changes in the exchange rate between the Japanese yen and Swiss franc on. (i) The carrying amount of the debt at each balance sheet date (ii) Interest expense on the debt

d. Discuss whether the bonds should be considered debt or eq- uity at the issue date.