What distinguishes specific coupon rate debentures from zero coupon rate debentures?

Specific coupon rate debentures have a fixed coupon rate, while zero coupon rate debentures do not have a specified rate

The correct answer is option 1- Specific coupon rate debentures have a fixed coupon rate, while zero coupon rate debentures do not have a specified rate.

The primary distinguishing feature between specific coupon rate debentures and zero coupon rate debentures is how they handle interest:

(a) Specific Coupon Rate Debentures: These debentures are issued with a specified rate of interest, which is called the coupon rate. The specified rate may either be fixed or floating. The floating interest rate is usually tagged with the bank rate.

(b) Zero Coupon Rate Debentures: These debentures do not carry a specific rate of interest. In order to compensate the investors, such debentures are issued at substantial discount and the difference between the nominal value and the issue price is treated as the amount of interest related to the duration of the debentures