Question

Which source of finance is preferred by investors who want fixed income at lesser risk. 

Options

• Debentures

• Preference shares

• Equity shares

• Bank Loan

Answer 1

Debentures

Explanation:

Investors who want a fixed income with lesser risk prefer debentures because:

• Debenture holders receive fixed interest at a predetermined rate.
• They have priority over shareholders when it comes to interest payments and repayment of capital.
• Debentures are considered safer investments compared to shares, especially in companies with a strong credit rating.