In context with debentures, consider the following statements:
1. A Debenture represents a debt
2. The income incurred by debenture is generally the interest income
3. Debenture is generally secured by assets

Which among the above statements is / are correct?

Answer: [C] 1, 2 & 3 are correct

Debentures are instrument issued by companies to raise debt capital. As an investor, you lend you money to the company, in return for its promise to pay you interest at a fixed rate (usually payable half yearly on specific dates) and to repay the loan amount on a specified maturity date say after 5/7/10 years (redemption). Normally specific asset(s) of the company are held (secured) in favour of debenture holders. This can be liquidated, if the company is unable to pay the interest or principal amount.

This question is a part of GKToday's Integrated IAS General Studies Module