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How would Angel Investor Pty Ltd classify this instrument

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Reference no: EM132981176

Question - Angel Investor Pty Ltd (the investor) enters into a contract with Easy Business Ltd (the borrower) to provide a $100 000 loan. Because the investor expects the borrower's business to grow substantially, the investor requires the borrower to settle the instrument in five years with 10 000 of the borrower's own equity instruments. Consider the following questions.

(a) Does this instrument meet the definition of a financial instrument? Explain your answer.

(b) If the instrument is a financial instrument, how would Angel Investor Pty Ltd and Easy Business Ltd classify this instrument?

Reference no: EM132981176

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