The correct answer is Option (2) - Unsecured Debenture
Here are explanations for each option:
Option 1: Secured Debenture
Explanation: Secured debentures are backed by specific assets of the company, which act as collateral. In case the company defaults on payment, debenture holders have a claim on these assets to recover their investment.
Option 2: Unsecured Debenture
Explanation: Unsecured debentures, also known as 'Naked Debentures' or 'Simple Debentures,' do not have any specific charge on the assets of the company. They are not backed by any collateral, and therefore, debenture holders rely solely on the company's creditworthiness for repayment.
Option 3: Irredeemable Debenture
Explanation: Irredeemable debentures, also known as 'Perpetual Debentures' or 'Non-Redeemable Debentures,' are long-term debt instruments with no maturity date. The company is not obligated to repay the principal amount during its lifetime. However, the company pays interest on these debentures regularly.
Option 4: Non-Convertible Debenture
Explanation: Non-convertible debentures are those debentures that cannot be converted into equity shares of the company. Unlike convertible debentures, which offer the option to convert into equity shares at a predetermined ratio, non-convertible debentures remain as debt throughout their tenure. They are typically issued with a fixed interest rate and maturity date. |
