Answer:
A debenture is an unsecured
loan you offer to a company. The company does not give any collateral
for the debenture, but pays a higher rate of interest to its creditors.
In case of bankruptcy or financial difficulties, the debenture holders
are paid later than bondholders. Debentures are different from stocks
and bonds, although all three are types of investment. Below are
descriptions of the different types of investment options for small
investors and entrepreneurs.
Debentures and Shares
When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get.
Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income.
Debentures and Shares
When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get.
Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income.
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