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Which of the following is a characteristic of debentures? 1) debentures are issued to raise debt funding
Which of the following is a characteristic of debentures?
1) debentures are issued to raise debt funding.
2) debentures are secured by a fixed or floating charge over the issuing entity's assets.
3) debentures may be issued to the public via a prospectus.
4) all of the options are characteristics of debentures.
Expert Solution
Correct answer: Option 4) all of the options are characteristics of debentures.
Explanation:
Debentures are issued as a source of finance to raise capital by selling the debentures. They are secured either by a fixed interest or a floating interest rate on the assets of the issuing company.
Fixed charge does not allow the disposal of assets without the consent of the lender or without providing a substitute for the asset held which is not the case in the floating charge.
Via a prospectus, the debentures can be issued to the public as well.
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