XYZ Ltd. operates in the FMCG sector in the South Indian market. To expand into Northern India, the company raises an additional capital of . It raises by issuing Debentures of each at a discount of , redeemable after years. The remaining funds are raised by issuing perpetual Debentures of of each at a premium. After six years of successful operations, the company takes a loan of from PNB, pledging Debentures of as collateral security. The loan is fully repaid within two years.How are the debentures (repayable after years) classified based on their redemption terms?
- AZero Coupon Rate Bonds/Debentures
- BRedeemable Debentures
- CConvertible Debentures
- DIrredeemable Debentures
Solution & Step-by-step Explanation
Debentures that specify a fixed maturity date or tenure for repayment (in this case, repayable after 6 years) are classified as Redeemable Debentures.