Which instrument is a type of long-term loan with fixed annual interest payments and is usually repayable at maturity?

Which instrument is a type of long-term loan with fixed annual interest payments and is usually repayable at maturity?

• A. Overdrafts
• B. Debentures
• C. Revenue expenditure
• D. Leasing

Answer: (B)

Debentures are a way for a company to borrow money for a long period. They are long‑term loan instruments raised from investors and typically come with fixed annual interest payments (coupons). At a set future date, the principal is repaid. This combination—long duration, fixed interest, and repayment at maturity—fits the description precisely. Overdrafts are short‑term bank borrowings that must be repaid quickly and usually carry variable interest charged on the outstanding balance. Revenue expenditure refers to ongoing operating costs, not borrowing. Leasing provides the use of an asset in exchange for regular payments and does not create a traditional loan that is repaid at a future date.

Debentures are a way for a company to borrow money for a long period. They are long‑term loan instruments raised from investors and typically come with fixed annual interest payments (coupons). At a set future date, the principal is repaid. This combination—long duration, fixed interest, and repayment at maturity—fits the description precisely.

Overdrafts are short‑term bank borrowings that must be repaid quickly and usually carry variable interest charged on the outstanding balance. Revenue expenditure refers to ongoing operating costs, not borrowing. Leasing provides the use of an asset in exchange for regular payments and does not create a traditional loan that is repaid at a future date.