Identify the methods of Redemption of Debenture from the following.
(A) By conversion into shares or new debenture
(B) Purchase in open market
(C) Sinking fund
(D) Payment in instalments
(E) Payment in lump-sum
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (B), (D) and (E) only
Redemption means repaying the amount of the debentures. The book gives four ways of doing it.
(A) By conversion into shares or new debenture — Correct. Debentures may be redeemed by converting them into shares or new debentures.
(B) Purchase in open market — Correct. A company may buy its own debentures in the open market and cancel them.
(C) Sinking fund — Incorrect. A sinking fund is a fund set aside out of profits to provide the money for redemption; it is a source of funds, not a way of repaying the debentureholders.
(D) Payment in instalments — Correct. Debentures may be repaid in instalments, usually by drawing lots.
(E) Payment in lump-sum — Correct. Debentures may be repaid in one lump sum on maturity.
NCERT (2026-27 edition):
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