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 negotiable instruments, and their transfer and interest payments do not require formal documentation or registration.

Answer 1

The Correct Option is A

Bearer debentures are unregistered securities, and the ownership is determined by possession. The company does not maintain any record of the holders of such debentures, and interest is paid to the individual presenting the attached coupon. This explains why both the Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A). \vspace{0.5cm} \hrule \vspace{0.5cm}