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Mike Ltd issues 50 000 $1 convertible notes to Jack Ltd. The notes pay interest at 3% p.a. Each note converts at any time at
Mike Ltd issues 50 000 $1 convertible notes to Jack Ltd. The notes pay interest at 3% p.a. Each note converts at any time at the option of Jack Ltd into one ordinary share. The notes are redeemable at the option of Jack Ltd for cash after 5 years. Market interest rate for similar notes without the conversion option is 4% p.a.
Calculate the value of the equity instruments, if any, that Mike Ltd needs to recognise for the redeemable convertible notes.
Group of answer choices
$43,322
$0
$6,678
$2,226
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