Depending upon the terms and conditions of issue and redemption of debentures, which of the following situation is not found in practice?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Issued at discount and redeemable at discount
A debenture issued at a discount brings the company less than its face value. If it were also repaid at a discount, the debentureholder would lose on both ends, once when buying and once when being repaid, so no investor would take it up. That is why debentures issued at a discount are redeemed at par or at a premium, never at a discount.
Option (1) Issued at par and redeemable at par — Found in practice. The plainest case: the investor pays the face value and gets the face value back.
Option (2) Issued at discount and redeemable at par — Found in practice. The discount is the investor’s gain at redemption; for the company it is a loss on issue of debentures.
Option (4) Issued at a premium and redeemable at par — Found in practice. The company receives more than the face value and repays only the face value; the premium is credited to Securities Premium.
NCERT (2026-27 edition):
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