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On 1 January 2018, a company issues 400,000 of 7 loan stock at par. Interest on this loan stock is payable on 31 December each
On 1 January 2018, a company issues 400,000 of 7 loan stock at par. Interest on this loan stock is payable on 31 December each year, The stock is due for redemption at par on 31 December 2021 but may be converted into ordinary shares on that date instead. The discount rate is 9% per annum (which is the rate of interest that would be expected on comparable loan stocks without the conversion option). The fair value of the liability component is: Select one: a. 374,082 b. E428,000 c. 112,000 d. 25,918
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