Practicing Success
Practicing Success
CUET Preparation Today
What is one advantage of redeeming debentures by purchase in the open market? |
It guarantees a premium price for the debentures It allows the company to redeem debentures only at maturity It provides flexibility for the redemption It requires prior approval from regulatory authorities |
It provides flexibility for the redemption |
The correct answer is option 3- It provides flexibility for the redemption. When a company purchases its own debentures in the open market for the purpose of immediate cancellation, the purchase and cancellation of such debentures are termed as redemption by purchase in the open market. The advantage of such an option is that a company can redeem the debentures at its convenience whenever it has surplus funds. Secondly, the company can purchase them when they are available in market at a discount. |
