Loan Capital: Debentures - SS2 Accounting Past Questions and Answers - page 1
1
What is a debenture?
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A
A type of equity instrument issued by a company
B
A type of debt instrument issued by a company
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C
A type of insurance policy issued by a company
2
What is the fixed interest rate for debentures?
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A
The interest rate that changes throughout the term of the debenture
B
The interest rate that is determined at the time of issuance and remains constant throughout the term of the debenture
C
The interest rate that is determined by the investor
3
What is the maturity date for debentures?
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A
The date on which the issuer must repay the principal amount of the debenture to the investor
B
The date on which the investor must repay the principal amount of the debenture to the issuer
C
The date on which the interest rate for the debenture changes
4
What is the difference between secured and unsecured debentures?
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A
Secured debentures are backed by collateral, while unsecured debentures are not
B
Secured debentures have a higher interest rate than unsecured debentures
C
Secured debentures can be converted into equity, while unsecured debentures cannot
5
What is the priority in case of bankruptcy for debenture holders?
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A
Debenture holders have priority over shareholders to recoup their investment
B
Shareholders have priority over debenture holders to recoup their investment
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C
Debenture holders and shareholders have equal priority in case of bankruptcy
6
What is the main difference between a debenture and a share?
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7
Discuss “priority in case of bankruptcy” as a feature of debentures.
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