DEBENTURE BOND Meaning and
Definition
-
A debenture bond, also referred to as a debenture, is a type of debt instrument issued by a corporation or government entity to raise capital. It represents a long-term loan that investors provide to the issuer in exchange for periodic payments of interest and eventual repayment of the principal amount.
In essence, a debenture bond is a contract by which the issuer borrows money from bondholders with a promise to repay the loan at a specified maturity date. The bondholder becomes a creditor and holds a claim against the assets of the entity issuing the debenture, which serves as collateral to secure the repayment.
Debenture bonds are usually unsecured and rank lower in priority compared to secured debt. This means that in the event of bankruptcy or default, debenture holders may not have a specific claim on the issuer's assets and are therefore exposed to higher risk.
Typically, debenture bonds carry a fixed interest rate that is paid to bondholders annually, semi-annually, or at other agreed intervals until the maturity date. The interest received is typically taxable income for the bondholder. Upon maturity, the principal amount is repaid to the bondholder, concluding the debt obligation.
Debenture bonds are commonly bought and sold on the secondary market, providing a means for investors to trade and liquidate their holdings prior to maturity. Due to the perceived risk associated with these bonds, issuers often offer higher interest rates compared to more secure investments such as government bonds.
Overall, debenture bonds serve as a financing tool for corporations and governments to secure long-term capital while providing investors with fixed income streams and potential capital appreciation.
Common Misspellings for DEBENTURE BOND
- sebenture bond
- xebenture bond
- cebenture bond
- febenture bond
- rebenture bond
- eebenture bond
- dwbenture bond
- dsbenture bond
- ddbenture bond
- drbenture bond
- d4benture bond
- d3benture bond
- deventure bond
- denenture bond
- dehenture bond
- degenture bond
- debwnture bond
- debsnture bond
- debdnture bond
Etymology of DEBENTURE BOND
The word "debenture" originated from the Latin word "debentur", which means "there are owed" or "they are due". In the late 17th century, "debenture" was adopted in English to refer to a document that acknowledged a debt or obligation. In the context of finance, a debenture is a type of bond that is issued by a company or government entity to raise money. The term "bond" comes from the Middle English word "band" or "bond", which means a binding or obligation. Therefore, the etymology of the term "debenture bond" combines the historical roots of "debenture" and "bond" to describe a specific type of debt instrument.
