Question

The debentures which do not carry a specific rate of interest are known as ______.

Options

• Irredeemable debentures

• Bearer debentures

• Specific coupon rate debentures

• Zero coupon rate debentures

Answer 1

The debentures which do not carry a specific rate of interest are known as zero coupon rate debentures.

Explanation:

Zero coupon rate debentures, also called deep discount bonds, do not give regular interest payments. Instead, they are sold at a price lower than their face value, and at maturity, the company pays the full face value. The difference between the buying price and the face value is the investor’s profit or interest.