Loan stock is best described as

• A. Debentures with stocks as collateral
• B. Short-term government securities
• C. Bank loans
• D. Corporate stock equity

Answer: (A)

Loan stock is a form of corporate debt issued to raise long-term funds. It’s essentially a debenture: a loan to the company that pays a fixed interest rate and is repayable at a set date. Often these issues are secured by a charge over the company’s assets, meaning the loan stock has collateral backing. That combination—a fixed-interest loan to the company with security on assets—fits the description of debentures with securities as collateral.

This differs from short-term government securities, which are government debt with different maturities and risk profiles; from bank loans, which are typically not issued as market-traded securities; and from corporate stock equity, which represents ownership rather than a fixed debt obligation.