Question

Assertion (A): Interest on bearer debentures is paid to a person who produces the interest coupon attached to such debentures.
Reason (R): Bearer debentures are transferred by way of delivery and the company does not keep any record of these debenture holders.
Choose the correct option from the following:

• A. Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).
• C. Assertion (A) is correct, but Reason (R) is incorrect.
• D. Assertion (A) is incorrect, but Reason (R) is correct.

Hint:

Bearer debentures are anonymous instruments that simplify transferability but also carry higher risk due to the lack of holder records.

Answer 1

The Correct Option is A

Bearer debentures are instruments that do not require the holder’s name to be registered. The interest on these debentures is paid to whoever presents the attached interest coupons. Therefore, Assertion (A) is correct. Additionally, bearer debentures are transferred by delivery, and companies do not maintain records of these debenture holders. Thus, Reason (R) is also correct and explains why the company pays interest based on coupon presentation.