Question : Questions : Different Sources of Finance
Statement 1: Debentures are always issued at a premium above their face value.
Statement 2: Debentures carry a fixed interest rate.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statements 1 and 2 are true.
Option 4: Both statements 1 and 2 are false.
Correct Answer:
Statement 1 is true, and statement 2 is false.
Solution : The correct answer is (a) Statement 1 is true, and statement 2 is false.
Statement 1 is true. Debentures can be issued at a premium, at par, or at a discount to their face value. The pricing depends on various factors, including market conditions, interest rates, and the issuing company's creditworthiness.
Statement 2 is false. Debentures can have a fixed or variable interest rate, depending on the terms set by the issuing company. The interest rate can be fixed or may vary over time based on market conditions or other predetermined factors.
