Bratislava Entity issued 5,000 convertible debentures at a par value of €1,000 each. The bonds have a 10 year term and have an interest rate of 3.5 percent. The bonds are convertible at the option of the holder, at any time until maturity, into 50 common equity shares. For similar bonds without the conversion option, the prevailing interest rate is 6 percent. Determine the value of the liability and equity components of this convertible security.

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The Answer of Bratislava Entity issued 5,000 convertible debentures at a par value of €1,000 each. The bonds have a 10 year term and have an interest rate of 3.5 percent. The bonds are convertible at the option of the holder, at any time until maturity, into 50 common equity shares. For similar bonds without the conversion option, the prevailing interest rate is 6 percent. Determine the value of the liability and equity components of this convertible security.

Bratislava Entity Issued 5,000 Convertible Debentures at a Par Value