CA Intermediate · Financial Management and Strategic Management · Types of Financing
Meera Textiles issues 10,000 zero coupon bonds of face value Rs 1,000 each, redeemable at par after 3 years. The issue price per bond is Rs 750. By how much is the total amount raised less than the total redemption value, and what is the total discount?
The total discount is Rs 25,00,000. The company raises Rs 75,00,000 from 10,000 bonds at Rs 750 each but must redeem them for Rs 1,00,00,000 at face value, so the difference between redemption value and issue proceeds is the discount.
- ARs 25,00,000Correct
- BRs 30,00,000
- CRs 75,00,000
- DRs 2,50,000
Explanation
Redemption value = 10,000 x 1,000 = Rs 1,00,00,000. Amount raised = 10,000 x 750 = Rs 75,00,000. Discount = Rs 25,00,000. Rs 30,00,000 wrongly treats the discount as 30% of the issue price.
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