Convert Co issues a convertible loan that pays interest of 8% per annum in arrears. The market rate is 10%, being the interest rate for an equivalent debt without the conversion option. The loan of $3 million is repayable in full after three years or convertible to equity. Discount factors are as follows:

Year	Discount Factor @ 10%
1	.909
2	.826
3	.751

Required:       

• Split the loan between debt and equity at inception                                              
• Calculate the finance charge for each year until conversion/redemption.            
• Calculate the amount of outstanding Liability at end of each of the three years.