RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must either be redeemed at par, at the option of the holder, in three years’ time, or alternatively converted into equity shares in RS.
The characteristics of this instrument taken as a whole indicates that it would be classifed as which of the following?
A . Compound instrument
B . Debt instrument
C . Equity instrument
D . Discounted instrument
Answer: A
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