What is the difference between nonconvertible debentures and fixed deposits?

By Chizoba Morah AAA
A:

Debentures and fixed deposits are two different ways of investing money. A debenture is an unsecured bond. Essentially, it is a bond that is not backed by a physical asset or collateral. Sometimes, debentures are issued with provisions that allow the holder to exchange the debenture for company stock. Nonconvertible debentures are unsecured bonds that cannot be converted to company equity or stock. Nonconvertible debentures usually have higher interest rates than convertible debentures.

A fixed deposit is an arrangement with a bank where a depositor places money in the bank and is paid a regular fixed profit. The amount of profit or interest paid on the investment is fixed and will not increase or decrease at any time regardless of fluctuations in interest rate. The interest rate usually offered by fixed deposits is low compared to other investment forms because they are low-risk investments. Fixed deposits typically have maturities from two weeks to five years. Fixed deposits cannot be redeemed early. In other words, money cannot be withdrawn for any reason until the time-duration on the deposit has expired. If money is withdrawn early, then the bank can charge an early withdrawal penalty or fee. A very common example of a fixed deposit account is a certificate of deposit (CD).

For more, see our Certificates Of Deposit Tutorial.

This question was answered by Chizoba Morah.

RELATED FAQS

  1. How do you calculate retained earnings per share?

    Research the amount of retained earnings per share compared over time to understand whether or not a company uses its profits ...
  2. What is the difference between enterprise value and equity value?

    Valuating a business accurately depends heavily on the purpose of the valuation. Learn how enterprise value and equity value ...
  3. What is the difference between inflation and deflation?

    Determine how inflation and deflation affect prices and employment. Economies frequently teeter between these two economic ...
  4. Does inflation favor lenders or borrowers?

    Find out under what circumstances inflation benefits borrowers more than lenders and in which situations inflation can be ...
RELATED TERMS
  1. Noncancellable Insurance Policy

    A life or disability insurance policy that an insurance company ...
  2. Total Annual Loan Cost (TALC)

    The projected total cost that a reverse mortgage holder should ...
  3. Concurrent Periods

    A period of time in which more than one injury or disability ...
  4. Member Month

    The number of individuals participating in an insurance plan ...
  5. Premium Balance

    The amount of premium that is owed to an insurer for a policy, ...
  6. Pre-Existing Condition Exclusion Period

    A health insurance benefit provision that places limits on benefits ...
Related Articles
  1. Bear of the Day: Cimarex Energy (XEC) ...
    Stock Analysis

    Bear of the Day: Cimarex Energy (XEC) ...

  2. Bull of the Day: Skyworks Solutions ...
    Stock Analysis

    Bull of the Day: Skyworks Solutions ...

  3. Don't Pick The Wrong Type Of Retirement ...
    Retirement

    Don't Pick The Wrong Type Of Retirement ...

  4. Work For The Government? Top Retirement ...
    Retirement

    Work For The Government? Top Retirement ...

  5. Dow, S&P 500 Little Changed Despite ...
    Stock Analysis

    Dow, S&P 500 Little Changed Despite ...

Trading Center