Question:
The rate of interest payable on debenture is _____.
The rate of interest payable on debenture is _____.
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While floating-rate notes exist, standard debentures, especially in this context, are characterized by their fixed coupon rate. This provides certainty of income for the investor and predictable interest expense for the company.
Updated On: Sep 12, 2025
- fixed
- floating
- uncertain
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The Correct Option is A
Solution and Explanation
Step 1: Define a debenture.
A debenture is a long-term debt instrument used by companies to borrow money. It is an acknowledgment of debt.
Step 2: Understand the terms of a debenture.
One of the primary features of a debenture is the predetermined interest rate, also known as the coupon rate. This rate is specified in the debenture certificate and does not change throughout the life of the instrument.
Step 3: Conclude the nature of the interest rate.
Because the rate is specified at the time of issue and remains constant, it is a 'fixed' rate of interest.
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