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 In other words, money cannot be withdrawn for any reason until the time-duration on the deposit has expired. If money is withdrawn early, then the bank can charge an early withdrawal penalty or fee.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 many times has Warren Buffett been married?

    Warren Buffett has been married twice in his life, but the circumstances surrounding the marriages were anything but conventional.
  2. When do economists use GNP?

    Learn about the ways economists use GNP. Find out how the Bureau of Economic Analysis monitors U.S. economic performance ...
  3. What is Warren Buffett's investment history with the Washington Post?

    Learn why one of the richest men in America passed up the opportunity to take over one of the nation's most celebrated and ...
  4. What investments have been the poorest historical performers?

    Learn about low performance investments and how they are used by investors. Find out which investments lose funds and how ...
RELATED TERMS
  1. Endowment Effect

    The endowment effect describes a circumstance in which an individual ...
  2. Self-enhancement

    The self-enhancing bias is the tendency for individuals take ...
  3. Gamification

    Gamification describes the incentivization of people's engagement ...
  4. Freelance Economy

    A freelance economy revolves around hiring self-employed workers ...
  5. Anchoring and Adjustment

    Anchoring and adjustment is a cognitive error described by behavioral ...
  6. Sample Size Neglect

    Sample size neglect occurs when an individual infers too much ...

You May Also Like

Related Articles
  1. Stock Analysis

    Barron's Recap: Is Now The Time To Sit ...

  2. Stock Analysis

    Does It Still Make Sense To Buy IPG ...

  3. Stock Analysis

    Why Should You Invest In Stratasys Today?

  4. Stock Analysis

    What’s The Best Airline Stock In the ...

  5. Stock Analysis

    Why Is Enterprise Products Partners ...

Trading Center