Definitions
- A type of long-term debt instrument issued by a company or government. - A document that acknowledges the debt and specifies the terms of repayment. - A financial security that is not secured by any collateral or asset.
- A type of long-term debt instrument issued by a company or government. - A document that acknowledges the debt and specifies the terms of repayment. - A financial security that is backed by collateral or assets.
List of Similarities
- 1Both are types of long-term debt instruments.
- 2Both acknowledge a debt and specify the terms of repayment.
- 3Both can be issued by companies or governments.
- 4Both involve payment of interest to the investor.
- 5Both can be traded on financial markets.
What is the difference?
- 1Collateral: Debentures are unsecured, while bonds are secured by collateral or assets.
- 2Risk: Debentures are riskier than bonds because they are not backed by collateral.
- 3Interest rate: Debentures typically have a higher interest rate than bonds due to their higher risk.
- 4Maturity: Debentures have a longer maturity period than bonds.
- 5Issuer: Debentures are usually issued by companies, while bonds are often issued by governments.
Remember this!
Debenture and bond are both types of long-term debt instruments that acknowledge a debt and specify the terms of repayment. However, the main difference between them is that debentures are unsecured and riskier than bonds, which are secured by collateral or assets. Additionally, debentures typically have a higher interest rate and longer maturity period than bonds.
