QUESTION 6 X Inc entered into a contract with Y Inc to issue 1 Million $ 100 10% Debentures against which the latter company will surrender equivalent equity shares of X Inc, at the mean closing market price of next three months. Is it a financial instrument?

This contract is a financial instrument because it involves the issuance of a debt security (debenture) and the potential surrender of equity shares.

However, the calculation cannot be tabulated as the mean closing market price of the next three months is not yet known. The value of the equity shares surrendered will depend on the market price at the time of surrender.

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