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 In other words, money cannot be withdrawn for any reason until the time-duration on the deposit has expired. If money is withdrawn early, then the bank can charge an early withdrawal penalty or fee.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 is a debenture stock different from a regular debenture?

    Learn to differentiate between standard debentures and debenture stocks, which are equities that act more like preferred ... Read Answer >>
  2. What is the difference between a debenture and a bond?

    Learn how to differentiate between debentures and bonds, two types of debt securities that can be issued by a government ... Read Answer >>
  3. What are the differences between preference shares and debentures?

    Learn why preference shares are equity securities and debentures are debt securities. Understand the differences between ... Read Answer >>
  4. What is the difference between a demand deposit and a term deposit?

    Understand the meaning of demand deposits and term deposits, and learn about the major differences between these two types ... Read Answer >>
  5. What are the Federal Reserve's guidelines on demand deposit accounts?

    Read about some of the Federal Reserve's requirements and guidelines regarding the treatment, safeguarding and processing ... Read Answer >>
Related Articles
  1. Investing

    Debentures

    Learn more about this type of debt instrument.
  2. Investing

    The Wonders Of Convertible Bonds

    Ever wondered what exactly a convertible bond does? Read the features of a convertible bond and learn how important the conversion factor is to you as an investor.
  3. Investing

    How Time Deposits Work

    A time deposit is an interest-bearing bank deposit that has a specific maturity date.
  4. Investing

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  5. Personal Finance

    Where To Put Your Cash: Call Deposit Vs Time Deposit Accounts

    Time deposit accounts and call deposit accounts allow customers to earn higher interest in exchange for less access to their cash.
  6. Investing

    What is a Demand Deposit?

    A demand deposit is any type of account where the money in the account may be withdrawn at any time without prior notice to the financial institution.
  7. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  8. Personal Finance

    The 7 Best Places To Put Your Savings

    You work hard to put your money away for the future, but where you should you keep it?
  9. Investing

    Explaining Fixed Income

    A person living off a fixed income is usually a retiree receiving a fixed, steady monthly inflow of cash.
RELATED TERMS
  1. Debenture

    A type of debt instrument that is not secured by physical assets ...
  2. Compulsory Convertible Debenture - CCD

    A type of debenture in which the whole value of the debenture ...
  3. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  4. Agency Debentures

    Debt issued by a federal agency or a government-sponsored enterprise ...
  5. Trust Preferred Securities - TruPS

    A security similar to debentures and preferreds that is generally ...
  6. Unsecured Note

    A loan that is not secured by the issuer's assets. Unsecured ...
Hot Definitions
  1. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  4. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  5. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
  6. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
Trading Center