Question

What is debenture and how we calculate its intrest

Answer 1

Debentures are like fixed deposits with a fixed interest rate.  Debentures are issued by companies to public. They are long term loans taken from public.  They can be called investments from the public point of view, with a fixed and assured interest rate.  Many people prefer debentures to fixed deposits in banks as the interest rates are higher.

Interest is calculated normally as a simple interest annually. The invested sum  is credited to the account holders on maturity or when encashed.  The interest is paid periodically to the investor.

A debenture certificate is issued by the company to the holder.  Interest on debentures is paid first to the holders and then payments related to shareholders is taken care of.

Ten debentures with its face value of  Rs 1000 and interest 12% generates an annual interest of  10 * 1000 * 12% = Rs 1,200.

Answer 2

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