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When debentures are issued as collateral security, interest is paid on:
- a)Nominal value of debentures
- b)Face value of debentures
- c)Discounted value of debentures
- d)No interest is paid
Correct answer is option 'D'. Can you explain this answer?
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When debentures are issued as collateral security, interest is paid on...
Debentures as Collateral Security
Debentures are a type of debt instrument issued by companies to raise funds from the public. They are usually secured by the assets of the company and offer a fixed rate of interest to the investors. In some cases, debentures may be issued as collateral security for loans taken by the company.
When debentures are issued as collateral security, the interest paid on them depends on various factors such as the terms of the loan agreement, the creditworthiness of the company, and the prevailing market conditions. However, in general, the following rules apply:
No Interest is Paid on Debentures
When debentures are issued as collateral security, the lender holds them as security for the loan. The lender does not have any ownership rights over the debentures and is only entitled to use them as collateral in case the borrower defaults on the loan. Therefore, no interest is paid on the debentures as the lender does not own them.
Interest is Paid on the Loan
The borrower has to pay interest on the loan taken against the debentures. The interest rate depends on various factors such as the creditworthiness of the borrower, the duration of the loan, and the prevailing market conditions. The lender may also charge a margin over the prevailing interest rate to cover the risk of default.
Conclusion
Debentures may be issued as collateral security for loans taken by companies. When debentures are used as collateral security, no interest is paid on them as the lender does not own them. Instead, the borrower has to pay interest on the loan taken against the debentures.
Debentures are a type of debt instrument issued by companies to raise funds from the public. They are usually secured by the assets of the company and offer a fixed rate of interest to the investors. In some cases, debentures may be issued as collateral security for loans taken by the company.
When debentures are issued as collateral security, the interest paid on them depends on various factors such as the terms of the loan agreement, the creditworthiness of the company, and the prevailing market conditions. However, in general, the following rules apply:
No Interest is Paid on Debentures
When debentures are issued as collateral security, the lender holds them as security for the loan. The lender does not have any ownership rights over the debentures and is only entitled to use them as collateral in case the borrower defaults on the loan. Therefore, no interest is paid on the debentures as the lender does not own them.
Interest is Paid on the Loan
The borrower has to pay interest on the loan taken against the debentures. The interest rate depends on various factors such as the creditworthiness of the borrower, the duration of the loan, and the prevailing market conditions. The lender may also charge a margin over the prevailing interest rate to cover the risk of default.
Conclusion
Debentures may be issued as collateral security for loans taken by companies. When debentures are used as collateral security, no interest is paid on them as the lender does not own them. Instead, the borrower has to pay interest on the loan taken against the debentures.
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When debentures are issued as collateral security, interest is paid on...
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When debentures are issued as collateral security, interest is paid on:a)Nominal value of debenturesb)Face value of debenturesc)Discounted value of debenturesd)No interest is paidCorrect answer is option 'D'. Can you explain this answer?
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When debentures are issued as collateral security, interest is paid on:a)Nominal value of debenturesb)Face value of debenturesc)Discounted value of debenturesd)No interest is paidCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When debentures are issued as collateral security, interest is paid on:a)Nominal value of debenturesb)Face value of debenturesc)Discounted value of debenturesd)No interest is paidCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When debentures are issued as collateral security, interest is paid on:a)Nominal value of debenturesb)Face value of debenturesc)Discounted value of debenturesd)No interest is paidCorrect answer is option 'D'. Can you explain this answer?.
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