10% debentures of ₹1,00,000 are issued by the company. What does this 10% mean?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Interest rate on debentures.
The 10% refers to the interest rate on the debentures.
In this case, the company has issued debentures worth ₹1,00,000, and the 10% indicates that the company will pay 10% interest annually on the ₹1,00,000 debenture amount. So, the company will pay ₹10,000 as interest each year on the debenture amount of ₹100,000 (10% of ₹100,000).