Which of the following is a feature of debentures?

• A. They are secured by collateral
• B. They pay variable interest
• C. They are sold on the money market by companies wanting to borrow money
• D. They are not tradable

Answer: (C)

Debentures are a form of long‑term debt issued by a company to raise funds by selling the obligation to investors. Because they are marketable securities, the company borrows by bringing in money from investors in the financial markets, which is the idea captured by describing them as sold on the money market by the company seeking finance. They provide a fixed stream of interest to investors and the principal is repaid at maturity, and they are typically tradable in the market.

In contrast, debentures usually pay fixed interest rather than variable, and they are tradable, so statements that they pay variable interest or are not tradable aren’t correct. Some debentures may be secured by collateral, but that isn’t universal, which is why the most general feature emphasized here is their marketable nature as a means for a company to borrow.