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In the world of corporate finance, understanding what are debentures is essential for both investors and businesses. Debentures are among the most widely used debt instruments to raise capital, offering a middle ground between fixed deposits and equities.
What Are Debentures?
The term debenture refers to a type of long-term debt instrument issued by corporations or governments to borrow money from the public. So, what are debentures exactly? They are essentially loan certificates issued to investors, with a promise of fixed interest payments over a defined period and repayment of the principal on maturity.
Unlike loans from banks that may require security, many debentures are unsecured—meaning they are not backed by any collateral. Instead, the investor’s trust lies solely in the issuer’s creditworthiness. In essence, buying a debenture means you are lending money to the issuer, and in return, you receive interest income and your principal back at the end o
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