CMA Intermediate · Financial Management and Business Data Analytics · Sources of Finance
Kaveri Ltd issues a Foreign Currency Convertible Bond of USD 1,000 face value, convertible into 20 equity shares at the holder's option. The share price is Rs 4,000 and the exchange rate is Rs 80 per USD. What is the conversion value of one bond in rupees?
The conversion value of one bond is Rs 80,000. It is found by multiplying the 20 shares received on conversion by the market price of Rs 4,000 per share. The exchange rate is not needed for this calculation.
- ARs 80,000Correct
- BRs 1,00,000
- CRs 1,600
- DRs 60,000
Explanation
Conversion value = number of shares x market price = 20 x Rs 4,000 = Rs 80,000. The face value in rupees is 1,000 x 80 = Rs 80,000 as well, but conversion value depends on the share price, not the exchange rate. Rs 1,00,000 is not derived from the data.
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