Which of the following accurately describes a debenture?
A)A legal contract between the bond issuer and the bondholders.
B)A type of bond issued in the names and addresses of the bondholders.
C)A type of bond which requires the bond issuer to create a sinking fund of assets set aside at specified amounts and dates to repay the bonds.
D)A type of bond which is not collateralized but backed only by the issuer's general credit standing.
E)A type of bond that can be exchanged for a fixed number of shares of the issuing corporation's common stock.

Question

Quizplus · Accepted Answer

A debenture is a type of bond that is not secured by any collateral (such as property or assets) but is instead backed only by the issuer's general creditworthiness and ability to repay the bond. It is essentially an unsecured loan taken out by the bond issuer, and the bondholders rely on the issuer's promise and reputation to repay the bond principal and interest on time. The other choices describe different features of bonds, but do not accurately describe a debenture.

Which of the Following Accurately Describes a Debenture