- Debenture is you are lending loan to a company. You will get fixed rate for fixed period.
- It is a debt instrument, which is not backed by collaterals.
- A Debenture is a long term debt instrument issued by government and big institutions for the purpose of raising funds.
- In return a specific rate of interest is paid to the debenture holder by debenture issuer similar to the case of a loan.
- Bonds are more secure than debentures.
TYPES OF DEBENTURES:
CONVERTIBLE DEBENTURES: These are converted into some other type of securities.
CORPORATE DEBENTURES: These are issued by companies and they are insecure in nature.
BANK DEBENTURES: These are issued by banks.
GOVERNMENT DEBENTURES: These include treasury bond and treasury bill issued by government. These are risk free investment.
SUBORDINATED DEBENTURES: These are carries a lower payment mode than the other debentures.
CORPORATION DEBENTURES: These are issued by various corporations.
EXCHANGEABLE DEBENTURES: These are convertible debentures, but this debenture can only be converted to the common stock of a subsidiary company.
COLLATERALS:
These are asserts or properties which are provided to secure a loan or any other type of credit.
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