ILLUSTRATION 1

•Convertible bond issued at par on 1 Jan 20x0

•Nominal value of $100,000.000
•Repayable at 31 December 20x3
•Annual coupon at 4% per annum
•Interest payments were paid at the end of each half-yearly period (2% per half-year)
•Convertible at $1 of bond to 0.75 ordinary shares at any time up to the date of maturity.
•A similar bond issued by this enterprise, which did not have a convertible feature, paid interest

Debt component
PV= 92,980,308
Equity component
Value of equity 7,019,692

Date Cash interest Effective interest Amortized discount

1/1/20x0
30/6/20x0 2,000,000 2,789,409 789,409
31/12/20x0 2,000,000 2,813,092 813,092
30/6/20x1 2,000,000 2,837,484 837,484
31/12/20x1 2,000,000 2,862,609 862,609
30/6/20x2 2,000,000 2,888,487 888,487
31/12/20x2 2,000,000 2,915,142 915,142
30/6/20x3 2,000,000 2,942,596 942,596
31/12/20x3 2,000,000 2,970,874 970,874

Record:
1/1/20x0
Nợ tiền 100,000,000
Có Trá i phiếu chuyển đổ i 92,980,308
Có Quyền chọ n chuyển đổ i 7,019,692

30/6/20x0
Nợ chi phí lã i 2,000,000 ( giả sử trả bằ ng tiền)
Có tiền 2,000,000

Nợ Quyền chọ n chuyển đổ i 789,409

Có trá i phiếu chuyển đổ i 789,409

tương tự cho cá c kỳ trả tiếp theo

 y period (2% per half-year)
ime up to the date of maturity.
ave a convertible feature, paid interest of 6% per annum (3% per half year).

Unamortized discount CA
7,019,692 92,980,308
6,230,283 93,769,717
5,417,191 94,582,809
4,579,707 95,420,293
3,717,098 96,282,902
2,828,611 97,171,389
1,913,470 98,086,530
970,874 99,029,126
- 0 100,000,000
ILLUSTRATION 2

Continuing Illustration 1, assume that on 30 June 20x1, 20% of the convertible debt holders exercised their rig
prices performed badly and by expiry date, no other conversions were made.
holders exercised their right to convert the bonds to equity. Subsequent to this date, the share
ILLUSTRATION 3
•Same facts as in illustration 1. On 31 Dec 20x1, market interest rate for similar bond (based on illustration 1)
the convertible bond by:
–Repurchasing it for $108 million
–Redemption price is allocated between debt and equity components
sed on illustration 1) with no conversion feature was 4% per annum. Company decided to redeem

omponents
ILLUSTRATION 4
•Continued from illustration 1:
–Company changed conversion ratio to 0.8 ordinary shares (from 0.75) if bond holders co
–Share price on 2 Jan 20x2 was $2 per share
–New shares to be issued on full conversion = 80 million vs. 75 million
–Cost of inducing the conversion = $10,000,000 ($2 x 5,000,000 [increase in new shares])
75) if bond holders converted the bond before 31 Jan 20x2

rease in new shares])

ILLUSTRATION 5
•Convertible bond issued at par on 1 Jan 20x0
•Nominal value of $100,000.000
•Repayable at 31 December 20x3
•Annual coupon at 4% per annum
•Interest payments were paid at the end of each half-yearly period (2% per half-year)
•Convertible at $1 of bond to 0.75 ordinary shares at any time up to the date of maturity.
•A similar bond issued by this enterprise, which did not have a convertible feature, paid interest of 6
• Transaction costs incurred in the issue of the convertible bond by Alpha Corporartion amou
ure, paid interest of 6% per annum (3% per half year).
Corporartion amounted to $500,000.