Debenture

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A debenture is a type of long-term debt instrument that is issued by a company or organization to raise capital. It is a form of bond that is backed by the general creditworthiness and reputation of the issuer rather than any specific collateral.

When a company issues a debenture, it is essentially borrowing money from investors. The investors who buy the debentures are effectively lending money to the company, and in return, they receive interest payments at a predetermined rate for a specified period of time.

Debentures are typically issued with a fixed rate of interest, which is paid out periodically to the debenture holders. They usually have a fixed maturity date, at which point the company is required to repay the principal amount of the debt.

Debentures can be secured or unsecured. Secured debentures are backed by specific assets of the company, such as property or equipment, while unsecured debentures are not backed by any specific assets and are therefore riskier for investors.

Debentures can be bought and sold on the open market, providing investors with a degree of liquidity. They are often used by companies to raise long-term financing for capital projects, expansion plans, or other strategic initiatives.

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