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 In other words, money cannot be withdrawn for any reason until the time-duration on the deposit has expired. If money is withdrawn early, then the bank can charge an early withdrawal penalty or fee.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. What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ...
  2. How can I find good investments among lower rated bonds?

    Invest in high-yield bonds through mutual funds, exchange-traded funds or closed-end funds, leaving the job of finding a ...
  3. What is the disparity index formula and how is it calculated?

    Discover how to calculate the disparity index, a technical indicator used by analysts to measure price movements in a candlestick ...
  4. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ...
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. 5 IPOs That Broke The Markets In 2014
    Investing News

    5 IPOs That Broke The Markets In 2014

  2. How Much Money Does Charles Schwab Have?
    Investing News

    How Much Money Does Charles Schwab Have?

  3. New Data Runs Counter - Ahead of Wall ...
    Stock Analysis

    New Data Runs Counter - Ahead of Wall ...

  4. The Corporate Ploy That's Helping These ...
    Investing

    The Corporate Ploy That's Helping These ...

  5. The Health Insurer Beating 92% Of The ...
    Investing

    The Health Insurer Beating 92% Of The ...

Trading Center