A company issued 1,000, 12% debentures of ₹100 each at 10% premium. 12% stand for?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Rate of interest.
The 12% refers to the rate of interest. Specifically, it indicates that the debentures will pay an annual interest of 12% on the face value of ₹100 for each debenture.
The rate of interest is a prefix value to the debenture, say 9% Debentures and, therefore, is payable even if the company incurs a loss. It is a charge against profit.