Question

Ramanpreet is a cautious investor who wants to invest ₹ 1,00,000 for ten years in a debt security offered by a company.

Which debt security should Ramanpreet invest in? Explain any four of its features.

Answer 1

Ramanpreet should invest in the debentures of a company.

Four features of debentures are as follows:

1. Debentures are debt instruments that represent the company’s borrowed funds.
2. Debenture holders are the company’s creditors without voting rights.
3. Debentures pay annual interest at a fixed rate, regardless of profit or loss.
4. Debentures generally involve a levy on the company’s assets.